Purchasing a new construction

[Anonymous]

Hello,

Could someone please explain the home-buying process on a new construction.  Do you apply for a mortgage before the home is completed or do you place an offer pre-construction, etc.?  Thanks!   -YesICan42

[demo18c]

Its just like buying a house already built. My house is being built and and i put in an offer along with my pre-approval letter to the builder. The closing date is just further out(usually 30 days). When the house is nearing completion then we will start the meat and potatoes of the process.

[luvs2barre]

It's pretty much the same process of buying a re-sale. You will need to be pre-approved and you will need to send in your bank statements, 401k statements, paystubs etc. We are building new contruction and we were sent all of the disclosure documents. Our place won't be ready until May/June so we have picked out all of our options and now we are just waiting. My loan officer (the builder's preferred lender) said to call her when we do a pre dry wall walkthrough and at that point we should be 60 days out and she would then need to get new paystubs, bank statements etc.

[Anonymous]

Agreeing with others, We are building our home, Once the house was close to being complete, we started the building our loan file.

[Anonymous]

Thanks to all who replied.  I like the idea of new construction, but was wary of the process.  After much reading and your posts, I'm leaning closer in that direction. 

[Anonymous]

Just expect some delays for inspections when doing a new build. You will be at the mercy of them.

[Anonymous]

For me, I was working on my credit and when I got them to the bare 620, I went to look at property.  I applied with their mortgage people and when I got preapproved, I put in an offer.  The LO called the builders also to let them know I was preapproved and for how much, and I guess basically to let them know I was not wasting their time.

[Anonymous]

Are you able to secure the construction loan or is the builder going to do that?

Construction loans are hard to come by right now...  especially if you have no collateral, or you will need a minimum of 10% in cash reserves....  some banks want more than 10%...  or if you already own the property that can be used also...

In my case, the builder took out the constrction loan from his bank since I had only 7% cash reserves and didn't own the property...  he is escentially going to build the house and sell it back to me...

The nice thing about this situation is that if anything happens during construction... he is making the money pulls from the bank and all of the responsibilty is on him.

However, I did have to give him (escrowed) a deposit for him doing this... for $7000 (security).

[Anonymous]

When you say "new construction" is the home already build or are you picking all of the specs from the ground up???  If it's the latter, I'm the "odd ball" out on this one.  I actually sat down and did a purchase agreement i.e. picking out everything I wanted in my home. And then the following week, submitted everything to apply for loan in the exact amount of the cost of what I "built". 

As for the longer wait that was mentioned....they are right!!  I started the process in May/Permits weren't approved until August/Closed in November....definitely rewarding and worth the wait!!

[Anonymous]

Yes, my place was just framed and the roof is up....  I picked out a lot and a builder (for a custom/stick built home).

I also looked at Dan Ryan, Clayton, S&A, Foremost, etc, etc....  And that offers a little different building experience for the buyer.

Yeah, the time frame you get for a completed home....  I would add another month to that, at least. 

If anything you want in, or on your home in the building process is out of stock, or special order, or back ordered...  add a week.  Bad weather like the snow storm we just had here, I lost a week of construction.  I also lost time due to Thanksgiving, and then this x-mas, then New Year's.....  errhhh....

Problems drilling a well (if you require one)?  Problems  with product delivery?  Add more time on.

Then getting all the inspections done can take time.  If you need the electric company to run poles and electric service to your home....  6-8 weeks generally.  Need a phone line?  Add more time.

A contractor usually coordinates all of this during the building process...but RARELY all of this goes as planned.

And don't forget.  You will need to close on the house.  Hopefully you can get scheduled right as your home is finished.