topic Re: New construction mortgage question in Mortgage Loans

New construction mortgage question

Anonymous — Sun, 05 Nov 2017 04:41:51 GMT

My husband and I are in the process of repairing our credit so we can purchase a home. We visited a neighborhood today with new construction and met with the builder. We told him our situation that we’re not in the position to get a loan at this point but we’re taking the steps to get there. He suggested building because we can start the process of building while we prepare to get a loan. Basically we would have five to six months to get there while the house is being built. I know we can do it but it also makes me nervous to commit to a home before we actually have a loan secured. Has anyone gone this route??

Re: New construction mortgage question

IQn2D — Sun, 05 Nov 2017 06:27:07 GMT

You are not alone my friend. I was at a crossroad deciding which way to go also. Paying someone else’s mortgage for 10yrs then reality hit. Paying a mortgage would not be hard for me. The mistakes I’ve made over the years hindered me. So I came up with a plan, set some goals and started on my journey. However I still was nervous to sign a contract to build a new home. That was up to the point of actually signing the contract. I was able to get a pre-qualification letter with a median FICO 5, 4, 2 score of 620. Just like the builder explain to you about the six month to increase your score. A mortgage broker explained the same thing to me. Also, this site is wisdom on steroids with more than enough information to get your credit better. So my advice to you would be to sit down with your husband and develop a plan. Ask a mortgage brokers on here to look at your Fico Scores and financial information. This will give you a starting point to move forward to purchasing your home.

Note: The foundation was just laid for my new home this week. My median score at this time is 640 and will continue to rise. My tentative closing date is 2/22/2018.

Re: New construction mortgage question

NC_Mtg_Loaner — Mon, 06 Nov 2017 05:33:17 GMT

People do this all the time.

Builders are always building houses and looking to sell lots and committ your money to their housing products.

Realtors, builders and lenders are always looking for your committment in the future--don't go outside of your comfort zone without being aware of what's at stake. If you sign a building purchase contract without being able to close your loan in 3 - 6 months, you could very well lose some money that you might be required to pay so don't overlook that part of the contract and succumb to any sales pressure that's being applied.

Re: New construction mortgage question

Anonymous — Mon, 06 Nov 2017 06:41:53 GMT

I always wondered this as well. Does anyone know if Ryan homes does this?

Re: New construction mortgage question

Anonymous — Mon, 06 Nov 2017 15:11:40 GMT

This is exactly what I did. When we signed our contract in February 2017, my mortgage scores were less than 580 (see signature). We were set to close in August, and we connected with one of the preferred lenders who suggested we sign the contract and work on raising my scores. I joined the boards here and got heavily involved and learned a lot. I was able to raise my scores between 100-102 points from February-August 2017.

Depending on what's on your report it can be done. Unfortunately, our home is not ready yet, but it gave me more time to work on my items. We cleared underwriting last week and submitted our list of conditions, so the only thing we need now is the appraisal and the home to be finished!

Re: New construction mortgage question

Anonymous — Mon, 06 Nov 2017 15:13:11 GMT

Not sure if Ryan does this, but from what I hear DR Horton has their DHI homebuyers club. If you're scores don't qualify, they move you over to the club and work with you until your scores go up.

The builder I chose to go with does not have their own in-house lender so we had more options on what to do.

Re: New construction mortgage question

Anonymous — Mon, 06 Nov 2017 15:32:21 GMT

Ok, this is what I needed to hear! We met with a builder yesterday and submitted a loan application last night. I believe are mortgage scores are right at 580 so I’m hoping we get the go ahead to start the process. Build time is 6 months so I know we can really make some progress in that time. Due to your scores being low was there any delay in the construction?

Re: New construction mortgage question

Anonymous — Mon, 06 Nov 2017 15:40:14 GMT

No, the delay in construction is on their end as they had some permit issues. They will not delay construction to give you a chance to get your scores up.

When you sign the contract, look at the terms of cancellation. In our contract, if we did not meet financing requirements, meaning we exhausted all possibilities in trying to secure the loan, we would be able to receive our deposit back and walk away from the home. Our contract also states that after a certain point in construction, we are not able to receive our deposit back.

When it's time for you to sign your contract, review it and look at the scenarios for being able to walk away WITH your deposit. Do not take their word for it, read the contract.

Re: New construction mortgage question

Anonymous — Mon, 06 Nov 2017 15:46:19 GMT

Got it! I’m a legal assistant so I feel comfortable with getting a good grasp on the contract. Thanks for your help! Definitely feeling better about this!

Re: New construction mortgage question

Anonymous — Mon, 06 Nov 2017 21:30:42 GMT

@Anonymous wrote:
My husband and I are in the process of repairing our credit so we can purchase a home. We visited a neighborhood today with new construction and met with the builder. We told him our situation that we’re not in the position to get a loan at this point but we’re taking the steps to get there. He suggested building because we can start the process of building while we prepare to get a loan. Basically we would have five to six months to get there while the house is being built. I know we can do it but it also makes me nervous to commit to a home before we actually have a loan secured. Has anyone gone this route??

Do you mind me asking what builder are you going to do this with? The main builder where I live is Ryan homes and I am really curious if I could work something like this out with them too.

Re: New construction mortgage question

stema8701 — Mon, 06 Nov 2017 22:27:39 GMT

I don't think Ryan Homes does it. They would not start my build until I was fully approved through the Underwriting and middle score was 700.

Re: New construction mortgage question

Anonymous — Mon, 06 Nov 2017 23:05:35 GMT

One more question! I spoke to the lender today and he said we’re good to start building as long as we follow the steps he gave us. We’re four points from qualifying. One thing I didn’t think to ask is when they would start looking at bank statements and how far back. I wouldn’t want a wonky month with my bank to screw me up. Did they look at yours early on or once you got closer to closing?

Re: New construction mortgage question

Anonymous — Tue, 07 Nov 2017 13:56:32 GMT

They will want to see your previous 2 bank statements now. For you, that should be September and October 2017 statements. When you are around 30-45 days from closing, they will want updated statements as well.

So the answer is both times.

You're only 4 points from qualifying? That's great! That can be done by simply lowering your credit card balances depending on what your utilization on those look like.

Do you have collections/charge-offs too? Does the lender want you to take care of those?

Re: New construction mortgage question

Anonymous — Tue, 07 Nov 2017 14:21:46 GMT

That’s what I figured. Yep, the biggest issue is utilization. We actually decided to just put it in my husbands name since his score is higher and we can focus on one persons credit. He also makes the majority of the money.

Re: New construction mortgage question

Anonymous — Tue, 07 Nov 2017 14:35:47 GMT

We did the same thing in the beginning. Put the house in my husband's name and then after we added all the bells and whistles we were out of range on the DTI so we had to me to the loan, which is where things went down because of my bad credit at the time. Another thing to consider, if you're able to work on your credit, you can always choose to be added to the loan when they start to package it around 60 days before closing. A mortgage is a huge thing to have on your credit, so if you can, do it.

Sounds like you're in a better position than I was in. I had collections/charge-offs, ONE credit card and didn't know a thing about utilization.

Depending on what your utilization percentage is now, by the time you close you can gain well over 20-30 points by closing.

Re: New construction mortgage question

Anonymous — Tue, 07 Nov 2017 22:24:21 GMT

My husband and I went this route. We signed the contract with the builder Feb 2017 and we close this month. In February, I started with a 660 mid score and my husband a 580. Im now at 713 and my husband is at a 696. I filed BK and my husband doesn't have a BK. Neither of us have collections. I have a 6yr AAoA and my husband has a 3yr. Of course... we couldn't close before my 2yr BK threshold, 11/26/17, which is why they have it set for us to close 11/28/2017. Pay special attention to the contract especially the part regarding the earnest monies. Goodluck!

Re: New construction mortgage question

Anonymous — Tue, 07 Nov 2017 22:54:24 GMT

Thanks for your reply! I think we’re going to do it but it does make me nervous. My theory is our fate is in our hands. We save and budget and pay down the debt, we get a house otherwise we lose the house due to our poor money management.

Re: New construction mortgage question

Anonymous — Tue, 07 Nov 2017 22:57:15 GMT

Exactly @Traci1.