@Anonymous wrote:Thanks in advance to all the experts here for your sage advice. After a year of planning, DH and I have decided we would like to contract for a new construction home with a community builder in our area. We have our eye on a specific lot and spec house and would like to move fast before it sells (these guys are moving properties FAST). We feel anxious to pull the trigger now for several reasons.
1. We want an FHA case number before July 1 to avoid having to payoff one really old $0 CO Many lenders are already using the new rules even though it's not required so definetly check with the builders lender and find out if they are.
2. My DH's car loan pays off in August and we expect his score to dip once he no longer has an open installment loan (our current scores are EQ669/658 and TU 684/694) I wouldn't expect it to be drastic.
3. The build takes 120 days. Our middle-school aged daughter will be changing school districts and school starts in August.
We have the $3k the builder requires as earnest deposit and they say we can contract with a financing contingency to lock in the house we want along with a $2,000 seller credit towards closing costs (which goes down to $1,500 in May).
As it stands, we were planning on applying for pre-approval middle of May anyway, after our next cycle of CC statements and bank statement cut.
Questions:
- Will we need to have the entire down payment in the bank before we can get the FHA case number (prior to July 1)? No. You need to have it in there before the LO will send it to underwriting, at least that's how mine worked with WF.
- We remember reading once that FHA loans for new homes use the sales price in lieu of appraisal. Does this mean we will only need to pay for an inspection? No clue.
- Can we roll remaining closing costs into the loan since the house is under the FHA limit and our income would allow us to qualify for the max? I don't believe you can roll the costs into the loan. But what you can do is get the lender to pay part/most of them in exchange for a higher rate on the loan. Pretty much the reverse of you buying points, they can also pay points.
Thanks again for any help or advice.
Good luck!
Questions:
- Will we need to have the entire down payment in the bank before we can get the FHA case number (prior to July 1)? For our loan, we need to have our closing costs ready about 4 days before signing. We have turned in all conditions except for that, and it is fine.
- We remember reading once that FHA loans for new homes use the sales price in lieu of appraisal. Does this mean we will only need to pay for an inspection? You do not have to have an inspection unless you want to. As far as appraisal, you will have to have one. We are having that issue right now. Our house isn't going to be completed until about May 4th. We close May 10, so we will have to have the house appraised this week and then have a 442 (reinspect) once the house is completed, and this is just to timing and turn times.
- Can we roll remaining closing costs into the loan since the house is under the FHA limit and our income would allow us to qualify for the max? As far as I know, you cannot do this. But check with your LO, they should know for sure!
Thanks again for any help or advice.
Starting Score: TU 589 EQ 526 EX603
1. Do you anticipate any issues getting an FHA loan for construction in this neighborhood?
2. Their current build time in this development is 120 days. Would you please explain how the FHA pre-approval process would work in this scenario, since I know you previously told me the approval is only good 90 days? - They will repull and rerun your credit...
3. The base price is $260,000 which includes a modification we would require to the top floor. Then we understand that there may be "upcharges" once we select our finishes, appliances, etc. Plus we want to have them install a fence. As long as we're under the FHA limit (which our DTI and income fully support), can all this be rolled into the loan? - As long as you can afford it, you will be fine. Be warned that your builder may make you pay for any upgrades out of pocket. I think our builder made people pay for any upgrades that were over 10% of the sales price. IF we were unable to secure the loan, they get to keep that upgrade money. And yes, they will roll that amount into the loan (minus builder requirements)
4. At what point would you actually pull the FHA case number? It seems FHA is making expensive changes all the time now which I want to avoid! - As soon as you sign purchase and sales, and have an address
5. At what point in the process do we need to have all the closing costs in the bank? - This is lender dependant. We close on the 10th, but won't have our final money until the 4th.
6. Are both an appraisal and inspection required for new construction? If so, do we pay for these as part of closing costs or are these paid out-of-pocket along the way? Appraisal yes, inspection no. My appraisal was in my closing costs, but they actually ordered the appraisal yesterday, so we are paying for it now, but have to bring that much less to closing