First time homebuyer with borderline case for application denial ? ... help appreciated!

[StartingOver10]

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@Sk323i wrote:

OK -- so the term" Earnest Money" is only applicable to older home re-sales.

New homes are done using the term "schedule of deposits".

If the builder has listed a home at a certain price, and has a plan for a base model -- how much input do I have on the exact materials being used?

When do I move to "contract"?

Right now i'm going to go to a lender, get a pre-approval, go to view the desired property with a sales agent, and then shop around for other lenders - while the house if being built. 

At what point do I put in my official offer, or what is a "contract" before an offer?

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Make sure you have an agent that will represent you in the transaction.  The agent's at the builder's location represent the seller only.  The buyers' agent is compensated by the builder and it does not affect your selling price - but can get you additional goodies in your contract. 

EMD (earnest money deposit) is the term that is used for the initial deposit and is used for new construction too. I mention schedule of deposits because some buyers' prefer to make their deposits over time rather than all at once, up front. 

You put in your offer when you decide which home you prefer and you decide what you want to pay for it as it relates to the market. Most builders don't negotiate the price as much as negotiate free extras or even closing costs incentives.  Your offer becomes a contract when both the buyer and the seller agree to all the terms and have signed the contract (it has to be in writing to be enforceable). 

[Sk323i]

Lets say home is 100K

Let's say down payment is 10K

Is the EMD is due at time of offer? 

If so, in this case lets say that EMD in this case is 50% of the down payment = $5000

The remaining 50% of deposit plus any additional closing costs are due at time of Contract? Due at time of Closing?

Is there a difference between Closing and signing a contract?

[StartingOver10]

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@Sk323i wrote:

Lets say home is 100K

Let's say down payment is 10K

Is the EMD is due at time of offer? 

If so, in this case lets say that EMD in this case is 50% of the down payment = $5000

The remaining 50% of deposit plus any additional closing costs are due at time of Contract? Due at time of Closing?

Is there a difference between Closing and signing a contract?

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Some builders will require a minimum of 10% down.

Others will allow you to pay a small amount a the time of your offer and the rest is scheduled during the course of construction and/or at closing.

Yes, there is a huge difference between  Closing and signing a contract. 

Signing a contract is signing a Purchase and Sale agreement with all the terms both you and seller agree to in writing.  It is done at the beginning,

The closing is when you pay for the entire purchase price, your example $100k + applicable closing costs, and clear title (deed) transfers to you.

Since you are borrowing funds for new construction, at a minimum you have to complete your mortgage approval process after the contract is signed and before closing and the builder has to finish construction and have all applicable inspections, including a Certificate of Occupancy before you can close.

You don't own the property until you close on it. 

[Sk323i]

And what do I have to stipulate in those terms so that it is mutually understood that if the deal does not close -- I would receive the EMD or down payment that was given at time of offer - back - in full? What needs to be stipulated that I can change my mind or back-out?

Thank you! 

[bluevalentine78]

This is when having a real estate agent is important.   Also, usually, EMD isn't refundable past the option period of the contract (normally like 7-10 days from the date of the contract)

[StartingOver10]

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@bluevalentine78 wrote:

This is when having a real estate agent is important.   Also, usually, EMD isn't refundable past the option period of the contract (normally like 7-10 days from the date of the contract)

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^^^This is right.

Builders have attorney's that write their contracts. A builder contract is not at all similar to the state approved real estate contract used for the sale of existing residential homes.  However, there are some similarities - if you are not familiar with contracts, it is best you take the contract for an attorney for review. Even if you are familiar with the normal purchase and sale contract, take the builders contract form to your real estate attorney for review before you sign anything so you have a complete understanding of your obligations. 

[Anonymous]

OP, a real estate agent will be able to answer all these questions for you based on your particular situation.  While things generally go somewhat the same way, each deal can be just a little bit different.  That is why you have an agent to negotiate on your behalf. 

[MauiMan85297]

I'm presently in a new build in Mesa, AZ.  If you're going FHA most builders will collect the 3.5% that you're required to put down and may do it at various stages of the build (this may vary with builder).

You also may want to look into the Home in 5 program for DP assistance and once you sign a contract with the builder and a certain timeframe (in your contract) passes the only way to get your deposit back is if the builder cancels your contract or your lender doesn't qualify you for a loan.

[flippy1234]

I'm in Texas, and at the tail end of (hopefully) finishing up my new construction home. My experience after talking to multiple builders is that they are all different. Someonly wanted $1,000 earnest money to start a build vs. the one we ended up going with needed 3% + 25% of upgrade options. My builder also didn't need the 3% right away, we did 1% a month for 3 months and then our 25% of upgrade options when we visited the design center.