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Frequent Contributor
MrChairman
Posts: 461
Registered: ‎02-07-2010
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Pre Construction and Mortgage Loan

[ Edited ]

My wife and I are currently going to be apply for a mortgage late next month. The home isn't built yet. What I wanted to know is how does this process work exactly... Will we get approved for the mortgage and just wait for the home to be built or will we not close on the house until it is fully completed and inspection, ect. can take place? Also, when during this process would we actually lock in our interest rate? I am military and we are going to VA route.


Starting Score:TransUnion: 698 (12 FEB 2010), Equifax: 674 (12 FEB 2010)
Current Score (Lender Pulled):TransUnion: 695 (26 JUN 2013), Equifax: 636 (26 JUN 2013), Experian: 670 (26 JUN 2013)
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berrios94
Posts: 45
Registered: ‎04-27-2012
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Re: Pre Construction and Mortgage Loan

Hello there!

 

Well from my experience of going with a home builder (DR Horton) before any construction can take place, you must be fully approved for a mortgage loan first. So you will need to go through your mortgage application process first. The builders need to make sure that you do qualifiy, otherwise, they'll end up building a home that will sit there should the loan process fall through. 

 

Good luck!! :smileyhappy:

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84092
Posts: 11
Registered: ‎06-14-2012
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Re: Pre Construction and Mortgage Loan

I am also going VA and we are buying new construction using a lender preferred broker because of $10,000 towards prepaids and closing costs. Our application was treated like we were going to close next month. All documentation was submitted,credit (trimerge) run, we had to get an approval from automated underwriter.
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StartingOver10
Posts: 4,580
Registered: ‎03-06-2010
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Re: Pre Construction and Mortgage Loan

It really depends upon the type of builder you are buying from - there are two types of loans:

 

1) End loan. This is the type where you close after the house is built and it works just as stated above - you get your approval, the builder builds the house and you close at the end when construction is completed. Many of the larger builders with extensive construction credit lines have their buyers obtain end loans.

 

2) Or, a construction-perm loan. These types of loans are typically used for smaller builders or custom home type builders. You, the buyer, would get a contruction to permanent type loan from the bank and the bank would send out their own inspector to approve (or not) the draw requested by the builder. This means you actually purchase the land first and the loan is provided in draws to the builder as the home is completed. You pay interest on the amount drawn throughout the loan. Once the property is completed and a certificate of occupancy is issued, then the loan is converted to a "permanent loan".  The conversion is a seemless one, but you do have a second "closing".

Member
84092
Posts: 11
Registered: ‎06-14-2012
0

Re: Pre Construction and Mortgage Loan

I am also going VA and we are buying new construction using a lender preferred broker because of $10,000 towards prepaids and closing costs. Our application was treated like we were going to close next month. All documentation was submitted,credit (trimerge) run, we had to get an approval from automated underwriter.

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MrChairman
Posts: 461
Registered: ‎02-07-2010
0

Re: Pre Construction and Mortgage Loan

We are going through NVR Mortgage if this helps with answering the questions...


Starting Score:TransUnion: 698 (12 FEB 2010), Equifax: 674 (12 FEB 2010)
Current Score (Lender Pulled):TransUnion: 695 (26 JUN 2013), Equifax: 636 (26 JUN 2013), Experian: 670 (26 JUN 2013)
Goal Score:All scores 700+ by Dec 2013!!

Take the FICO Fitness Challenge
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StartingOver10
Posts: 4,580
Registered: ‎03-06-2010
0

Re: Pre Construction and Mortgage Loan


MrChairman wrote:

We are going through NVR Mortgage if this helps with answering the questions...


Is NVR Mortgage the inhouse lender for the builder? If so, then it is most likely an end loan you are getting.


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