Lending a Hand In The Construction Process
Step 1: Get Pre-approved for Your Construction Loan
• Work with a Seasoned Team or Professionals who can make this process go off without a hitch.
• Establish the Budget early. Get pre-approved.
• Down payments in today’s lending environment frequently range from 5-20% and there is often a house to sell for part of that.
• Buyers will need a reliable markeitng plan for their current home and options for an interim move to avoid the risk of double payments and to free up their cash.
• Once the financing strategy is in place it’s time to meet with your Builder’s Design Team to finalize a new home plan and price that fits into your lifestyle, payment and equity objectives.
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.
Step 3: Time to Move In!
• A final inspection by the appraiser is done to determine that the house was built according to the original plans and specifications once the house is complete.
• At this point, we’ll sign the documents to convert the construction loan to the permanent mortgage you’ve selected. Your fully amortizing loan payments will now be due the first of the month