Step 2: Getting Approval to Start Building
• The apprisal is based on a completed set of plans, specifications, and the builder’s contract and is done before the house is even started.
• The loan has two parts: the interim loan during the construction period and the permanent loan which is put in place once the house is completed. One approval covers both.
• Occasionally the buyer already owns the land and depending on how long they have been in title, we may be able to use appreciation or equity in the land instead of cash. You must have owned the land for at least a year for this is to be the case. Let us know if this is your situation.
• We need to establish clear title to the new home site before any work starts on the project.
• The time to build a new house averages about 120 days. While in the construction loan phase, you will pay interest only and only on the amount the builder draws each month.
• The rate for the permanent loan can be locked at the time the construction begins but is it often advantageous financially for the buyer to wait until about 60 days from completion on the new home. Paying a premium for a longer lock period is usually unnecessary with today’s rates. If you’re nervous about rising rates, a long term lock may be the right thing for you.