New home construction loans

[kdibattista]

Does anyone know about these? DH and I were set to buy an existing house within the next couple of months.... that is... until he saw the new development they are building on a golf course close by . We went to the sales office yesterday but they were very busy so we didn't get to talk to anyone. Anyway, I'm clueless about new construction and financing options and would really, really appreciate any guidance!!!!

Thanks!!!

 

[JayCT]

I am sure that the people in the sales office can help you with this. Is there a developer or is it a custom home community where you must get a builder and do everything? If you are on your own, call a few of the local banks and get some information from them. I, too, would be interested to see what you find out. I am thinking about building in the next couple of years. Good luck. Jay

 

[kdibattista]

It's a new development with one builder. I think I may take a ride up to the office today

 

[JayCT]

If they are a well known area builder with a good reputation, then you should have no problems. Defintely take a ride there, though call first. Some places are closed on Mondays if they are open on Sunday. Again, good luck. PS, I am so jealous. Jay

 

[Mishetta]

We set up an appt with a loan officer at our bank & she explained the many ways we could do a construction loan. Most builders want their money as they start a new phase of your home...sometimes you just don't have the cash (like us! ) So we had to look into "draw" type of loan. Some people get bridge loans....but I would go directly to the bank & get their advice on what would best fit your needs.

How exciting!! Good luck to you & hope all works out well!

 

[kdibattista]

Most builders want their money as they start a new phase of your home...sometimes you just don't have the cash (like us! ) So we had to look into "draw" type of loan.

That's what I just found out... they want 10% plus 30% of any upgrades.... that's $26,000 minimum

Can you give me some more info on the "draw" loan?

Thanks!!!

 

[BriarfoxinWA]

Construction loans usually have a "draw phase" where the loan is like a line of credit. You draw the necessary amount when needed to pay invoices. Usually you will have to present copies of the invoices to the bank to get the funds advanced to you. Once construction is complete you would need to refinance the balance into a conventional home loan.

Shop around for a good deal on the loan. Banks can vary a lot on what the fees and rates are. Don't be afraid to check with mortgage brokers also as they often specialize in this type of thing.

 

[DrCavin]

Definitly go & speak to a loan officer. The mortgage business has changed drastically the last 5 years and they offer many different programs to get you financed.

Typically a construction loan has 4-5 draws. First draw is taken when the foundation is complete, 2nd draw when the rough electrical, HVAC & plumbing is finished, 3rd when walls are done, 4th when the finish electric, HVAC & plumbing is complete & 5th is balance of what is owed to builder when you take possesion of the house. These can vary from bank to bank. A draw is basically you telling the bank that the work has been completed upto that point.

The builder then signs some paperwork saying that he has paid all the trades & no liens have been filed on the house. They get a check from the bank & you start paying the interest on the outstanding balance

Many construction loans will automatically roll-over to a normal mortgage after the last draw has been executed.

Good luck, building a home is an awesome experience!!!

 

[robsmom]

We bought new construction in a development and financially it really was no different from buying any other house. We put a deposit down but it wasn't 10%. I think maybe it was 5,000 or something like that. We picked options and stuff but they were just added to the sales price and became part of the mortgage. We did pay cash for a few options but only because they were late decisions and we didn't want to re-do our paper work with the mortgage company. I think it was about $1500 of outlets, cable connections etc that we added. Other than this, we got a mortgage and bought the house when it was done. We actually made out on the 1500 because the builder screwed up and didn't believe us. The added the 1500 to our deposit on the settlement sheet but didn't add it to the sales price of the house. So in essense we got the options for free!!

 

[tar heel]

We also bought new construction in a development. Our builder required $2,000 to reserve a lot and 5% including the $2,000 at the start of construction. You paid for light fixtures (beyond the allowance which was enough for one light), closet systems, landscaping beyond basic, etc., separately directly with the people doing them. We raised the 5%, but our sales rep forgot to ask us for it until about a month before closing. Although I told our mortgage broker that they had finally asked for it, he "forgot" and kept that $ as part of our downpayment as well as part of what we had already paid the builder. Imagine our surprie when we found out an hour before closing that we were supposed to show up with several thousand dollars.

My biggest piece of advice is that no matter how nice and helpful the builder's sales rep is, don't ever forget who that person works for and what his/her bottom line his: their commission. Because of this, get absolutely everything in writing.

 

[kdibattista]

Thanks everyone!!! If we do build in this development, the builder requires $500 to hold the lot for 10 days. Once the Agreement of Sale has been drawn up, we need to put down an additional 10% of the purchase price and 30% of all options. I asked my realtor to contact the builder and see if they will accept 5% down..... 10% is $26,000 . Since we are in an apartment, we don't have any equity that we can draw from . The development is steadily selling so I'm not sure they will accept 5%.

Another question.... did the builder pay for some or all of your closing costs?


Thanks everyone!!!

 

[onecoolmama]

We close on our land in about 30 days and my Dh was a mortgage person for a few years before he settled into computers. So we shoped. And, as people have told you it depends on the builders. WE are in a neighborhood where you can pick whatever builder you want...but the HOA has to approve the plans and that is $3750 alone.

For some builders you get your own consturction loan and other builders get it themselves. From what I understand fiancing the loans is a bit different. If they get their own construction loan the closing costs of that loan will be paid off by the new loan. So it will be rolled into the final loan. Actaully, from what I understand the same is true if you get the construction loan yourself.

But some builders that I have met with have you pay the intrest on the construstion loan while the house is being built and others dont. I did run into developments where the builders said that if you used their mortgage companies, they will give you free or reduced closing costs.

Anyway, good luck with the whole process! if you have any other questions PM me and I will have Dh answer them as best as possible.