Building a new home journey with PICS

[adymax]

 We signed a contract to build a home 3 weeks ago and made $1000 earnest money deposit and decided to go with builder’s lender. Sales person scheduled next appointment for tomorrow to pick our materials/design for the home and to make an additional 5K earnest money so they can start building the house. He said by this time we will have approval from underwriting, we are going FHA loan with IHDA (Illinois State) down payment assistance and they have preset rates.

Now lender is saying that it didn’t pass automatic underwriting because we had died in lieu registered in September of 2010, which we did and they knew about it but it will be over 3 years when we close in Nov/December.   When I asked local LO why they did automatic underwriting she said that sometimes it can pass with Died in lieu less that 3 years apart….I though that is BS. Anyway thay said will try a manual underwriting that will take another 7 days.

Now we are afraid that we don’t get approved with FHA IHDA which has preset rates so we know we get a decent rate at closing and lender can move us an a regular FHA and give us higher rate. We asked for letter from the lender to guarantees us that if we don’t get FHA IHDA loan we can walk away and get our money back and they refused sending us to the sales office. My wife is ready to cancel tomorrow’s appointment until we get underwriting approval in writing.

Any advice on this? 

[adymax]

Anyone?   Does an initial underwriting approval guarantee that we get the same type of loan 4 month from now?   Do we get a letter of approval or how does this works? The unknown is scary. 

[JAM2013]

Not at all.  We were prequalified but didn't receive a full approval until the week we closed on our loan.  Anything can come up in underwriting.  

[Amythyst]

Also, I dunno if the program you are using is the same as regular FHA but we are building a house as well and even though we were quoted a rate back when we started this process in February, we were not able to lock in a mortgage rate until last week.  So, our original percentage was 3.25% but we locked in at 3.8% ... so, you mentioned being able to get "preset rates"... do these rates fluctuate just like regular FHA?

And it is true, you can make it through desktop underwriting without being over the 3 year mark for your foreclosure... I know because I did it.  We also had a foreclosure in April of 2010 and even though it hadn't been 3 years yet (we applied in Februrary), we were still approved through automated underwriting.  So, it isn't crazy that they tried to get you through this first before sending you to manual underwriting.  But, just because you're in manual review does not mean you are going to be denied or anything.  But, it does mean they may look at your file more closely.  However, as the previous poster stated, you are not FULLY approved until just before closing after the house is done and they have done the appraisal.

As to your request to ask for a letter stating you can get your money back... that I have no advice on, I'm not sure they would be able to offer something like that to you.  The earnest money deposit is handled through your builder though and not the lender.  I believe your contract should say something about the terms and stuff for getting your earnest money back if something doesn't go right.

[adymax]

Thank You for your answer. By preset rates I mean they are dictated by IHDA and fluctuate with the market by at least are competitive. Look here: http://www.ihda.org/homeowner/currentRates.htm

We will move forward with the rest of the earnest money and wait for underwriting, Maybe we didn’t pass desktop underwriting because 3 years mark since foreclosure is 3 month away compared with only one in your case. Credit score is over 700 with no other issue, employment long enough but DTI is more strict with this program compared with FHA and we are borderline there.   Hopefully will get a rate of under 5% at the end of the year and rates will not go up more.

[kimmiller112]

I am currently in underwriting for a new home build.  I am going FHA and have given the builder earnest money.  My paperwork, which I signed, states that if for some reason, I am declined for the FHA loan that I applied for, my money will be refunded.  I am going through my builder's lender and have been told that this step will take up to 10 business day.  At that point, I will give them a second check for earnest money and make the appointment with the design center to go forward with the build.

The current rate I was given was 3.75 but the house will not be completed until December.  At any time up to 60 days prior to my closing I can lock in whatever the current rate is.  I can only do it once, so if the rate goes down after I lock it in, I can't change it.  But in SC, you can't lock the rate in more than 60 days in advance of the closing.

With a build, you should be fine as long as the 3 year mark occurs before you close.  My lender didn't care about inquiries I had a couple months ago, because they will be more than 6 months old by the time I close.  They didn't even care about two months bank statements right now because all they will want is the two months prior to closing.

[adymax]

Yes. They told us about getting the earnest money back if we don’t get the loan but I can on find in in the contract. We will ask tomorrow when we have the appointment to show us where it says that. The sales guy even said that the lot we are getting was under contract before but the lady got pregnant and they had to give her earnest money back as she backed out ffrom the deal. The local loan officer is promising us that we are in good shape with our credit score and everything but we cannot really on words but on paper.

I’ll make this topic “Our journey of building a home” and I’ll post pictures and updates as we progress.

[Amythyst]

Well we applied in February and the 3 years was up in April ... so 2 months... but I think you should be fine.  I have found, and this could be just my opinion, but it seems like if you do a new build and use the builder's lender that they are a little more lienient than someone doing a traditional buy. 

But, I'm the same way as you... I just keep thinking something is going to happen like this can't be true or this can't be so easy... I read lots of mortgage horror stories on the boards and I get so freaked out that mine is just going smoothly.  Its funny that we seem to panic more about stuff when nothing bad is happening afraid that something bad will happen then if it just didn't go smooth right from the get go. 

I pepper my loan officer with questions all the time because I'm scared I will find out I owe more money then they have told me or they'll find something in my file that they overlooked before ... but he's really patient with me and always responds and assures me.  I went with a local smaller builder and they seem to be very customer focused and informative. 

They basically told me to relax and enjoy the process instead of freaking out so much.   They let me do my earnest money deposit in monthly payments, they let me push my closing date out really far from what they would have wanted just so I could save up more money, they agreed to give me more closing cost assistance then they would usually give, my lender allowed me to do an 80 day lock in for free and I get a 1 time rate reduction if the rates go below what I locked in. I'm getting a lender credit as well.... so far, I'm super happy with the process.  I just need to stop worrying so much.

[adymax]

We went Saturday to pick up colors and design.  We also added some upgrades and we took off some. We got the Ok from the lender so they can start building, they need about 2-3 weeks to get permits and in about this time the construction manager will call us to schedule a pre construction meeting. Hopefully in 3 weeks they will start digging. Here is a picture of our lot .

Feel free to post your journey here with pictures if you are in process of building a house. 

Property line showing pine trees at the back corner of the lot. To the right there is a lawn area and a walking pathway:

[swtneka]

Cant w8 to read your journey!