Exact process of new home finance in new subdivision? (contingent, percentage, price)

[George Orwell]

Hi, can somebody outline a rough sequence of steps involved in the financing of a new home in a planned subdivision? Not custom and not hiring your own builder. Basically buying a home from a company like DR Horton or Beazer, etc.

Is it something like this:

1. negotiate the price and options and finally come to a final number.

2. Put some money down with builder (what percentage?)

3. Qualify for a loan. Get approved. When does the lender fund the loan?

I purchased an existing home before so I don't know about this 3rd step for a new home. For existing home, the lender funds at the close of escrow and I immediately take posession of the house and start making payments. The loan start date is the funding date.

If I buy a new home, it'll take them maybe 3-4 months to build the house.

When will the lender fund? And will I start owing money even though the house is still being built?

Or is this 3rd step happening only AFTER the house is built? The builder builds the house using their own money and we close escrow and my lender funds the loan then?

I think this last scenario is more likely but I want to confirm.


Thanks.

[middle-aged mom]

It takes a heck of a lot longer to break ground and complete a new tract home in my area. 3-4 months sounds extremely optimistic to me. But then again, homes here have basements and winter is not conducive to breaking ground.

Your contract needs to be minimally contingent upon your ability to finance the place.

I would bring in an independent inspector at critical points during construction and make the contract contingent upon the builder correcting any deficienies. Not all tract builders allow this.

Closing depends on the builder acquiring a certificate of occupancy from the local municipality. That's when the loan needs to be funded.

[FalconheadWest]

Financing of a new home is the exact same as a preowned home. You don't owe a payment until you own the house. You don't own the house while the builder is building it.

[2bindenver]

You close (the lender funds the loan and you take title) when the home is finished.

You will be asked for an earnest money deposit and a percentage of the options you order, when your appointment at the "design center" is completed.

It appears that you need a new construction specialist for representation. You don't know what you don't know, and it's highly unlikely that getting your answers here on this (or any) forum will take the place of good representation.

Good luck.

[George Orwell]

Thank you all for the replies. You have answered my question.

George Orwell