topic Re: Approval for New Home Construction Loan in Mortgage Loans

Approval for New Home Construction Loan

Anonymous — Thu, 17 Apr 2008 15:19:20 GMT

Thanks to the great advice on this site --- WE FINALLY DID IT!!!!!

Got approved for a conventional loan, no PMI, 6.2% interest, fixed 30 years (after construction)

Will be doing closing in two weeks and breaking ground that day.

Will be spending holidays in brand new home!!!!

I could not have done it without this forum.

Our scores improved over 100 points in a short amount of time.

Re: Approval for New Home Construction Loan

CLee — Thu, 17 Apr 2008 16:11:35 GMT

Congrats on your new home! How does this work exactly? I'm thinking of going for new construction; but I would like to hold on to my cash reserves if possible. I have about 35k saved and I'm looking at a loan of about 350k once I'm finished. Do you have to pay the builder up front for deposit, upgrades, etc and then obtian the loan? The idea of new contruction seems rather intimidating to me.

Re: Approval for New Home Construction Loan

Junejer — Thu, 17 Apr 2008 16:27:03 GMT

Congrats kmc.

Re: Approval for New Home Construction Loan

granny031350 — Fri, 18 Apr 2008 01:22:07 GMT

construction loans are based on LTV after the house is built. If after construction house is worth 100000 then loan to build could be no more than 80,000. If more, then PMI would be in effect. So OP 's loan was only for 80 percent of the appraised value of the home when completed

Re: Approval for New Home Construction Loan

CLee — Fri, 18 Apr 2008 01:36:49 GMT

Thanks for the info. The builders around here are on the last few lots and offering many incentives including excellent cash value on extras. So in theory, I could negotiate the extras, (which would not increase the home price from the total agreed amount) complete the loan at that dollar amount, have the finished home appraised at completion and possibly have equity in the house on day 1?

Re: Approval for New Home Construction Loan

Anonymous — Fri, 18 Apr 2008 14:32:48 GMT

We were in a little different situation as we already owned our 3.5 acres of land outright. The equity in this land served as our whole 20% downpayment required for no PMI.

We are actually not paying any cash down on the house. We are just paying closing costs.

We live in a very rural area, but I understand that getting major upgrades for free and help with closing costs is very common (especially with the credit crunch) in the major city areas.

The best advice I can give you is to work with a builder you are comfortable with. Get references, tour homes they have already done.

The job of building a house can be very scary, but the right people working with you can make all the difference. It did for us.

Any other questions, let me know.

Re: Approval for New Home Construction Loan

Anonymous — Fri, 18 Apr 2008 14:33:38 GMT

Oh, and yes, it is possible to have equity in your home as soon as it is finished. We will.

Re: Approval for New Home Construction Loan

CLee — Fri, 18 Apr 2008 19:28:57 GMT

Thanks for the info and good luck with the new home. I have lurked on this forum for a while and it amazes me when I see people being sucessful at utilizing the information from all the posters on myfico.