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Old 12-29-2010, 07:43 AM
 
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I plan to be building my new home very soon. I just signed a contract with my builder, and am working on my financing. I am a bit confused about the closing cost and down payments. Will the equity in my land be taken into consideration in the loan process? Also, will the bank lend 80% of the cost to build the house or 80% of the appraisal value?
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Old 12-29-2010, 08:19 AM
 
Location: New Braunfels, TX
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Yes, the equity of the land will be taken into account, since it's part and parcel of the overall loan. They'll lend up to 80% of the appraised value - I presume you're concerned w/that so as to avoid PMI? That's an outstanding idea! Also - if possible, check w/Randolph-Brooks Federal Credit Union. If you're qualified to go through them (and 95% of the folks are), they have some of the absolutely lowest rates out there - and they don't try to sneak in any "gotcha's" like so many lenders do.

Another HUGE benefit financing with them - #1, they do NOT sell their loans, so you'll always have them as your lender - no having to deal w/some group out of state that plays games. #2 - it costs $500 to refi an existing mortgage w/them (one that they already hold). That's worked VERY well for us - our initial note in '04 was for 20 years at about 5.8% APR. Last year, they were offering 4.7% APR on an 11 year note. The slight increase in monthly payment (by then, we had 15 years left on the original note) was almost completely offset by the savings in APR. Our total refi cost - $500, and took about 15 minutes on the phone, and signing a new note that they mailed to us. Earlier this year, they were offering like 3.6% APR on an 8-year note. Jumped on that, again it cost $500, raised our payment like $120 - but dropped our loan payoff by 2 years.
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Old 12-29-2010, 08:44 AM
 
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Default New Construction

Thank you. It has been very difficult getting direct answers from the lenders. I get alot of "it depends".

Being new to the process I am not familar with many of the terms. So it can get somewhat confusing.
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Old 12-29-2010, 08:58 AM
 
Location: State of Superior
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You will always be looking at a " construction Loan" first, not a mortage. They are 2 different things. I do noy know of any Banks that are floating home loans where there is nothing but raw land to look at. Most folks do a land contract first ( no credit requirements), and then roll over the entire deal into a mortage once there is a real house built.
There are a lot of restrictions on construction loans, draws, contractor requirements and qualifications. Most banks will not loan if you are wanting to save 10-15 per cent and be your own General Contractor.... I know , I have been building now for three years, almost done , but , with out any loans, as I was turned down many times for construction funds.
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Old 12-29-2010, 09:35 AM
 
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Default New Construction

I have paid on my property for 4 years. I have equity in it.

The cost to build the house and what is still owed on the land is a bit higher then I had anticipated (211).

My bank's loan offer explained that in order to get a conventional loan, my appraisal value would need to come in at 277.

I am not exactly sure how he came up with this total.
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Old 12-29-2010, 10:12 AM
 
Location: State of Superior
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It is very difficult , especially in rural areas of the country, to put real values on raw land. Banks are more interested in the " value" of a completed home , as there are comps., and reasonable established worth factors if the build was done by code, and a qualified Contractor. ( One approved by the Bank, there are " rebates" to the bank and builder going on also, so beware ). By being your own General Contractor you can save up to 25 per cent, and be in better shape to pay off the land contract , and get a mortage, with out additional cash down.
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Old 12-29-2010, 10:57 AM
 
Location: Boise, ID
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You said you signed a contract with "my builder", so I'm curious if you are having to obtain financing for the construction process (a construction loan) or just trying to figure out your mortgage for the final product (a normal mortgage). They operate very differently. In my area, it is normal for the builder to have the construction loan, and the buyer to obtain a mortgage to close when the house is finished.
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Old 12-29-2010, 11:05 AM
 
Location: Laguna Niguel, CA
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Lacerta brings up a great point - construction financing is much more scarce/difficult to qualify for then permanent financing. If the builder is building on their own dime, then you just need to obtain the permanent financing at the end.
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Old 12-29-2010, 11:32 AM
 
Location: State of Superior
8,632 posts, read 14,351,702 times
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Quote:
Originally Posted by ShanetheMortgageMan View Post
Lacerta brings up a great point - construction financing is much more scarce/difficult to qualify for then permanent financing. If the builder is building on their own dime, then you just need to obtain the permanent financing at the end.
If you are not buying a " speck house" , and are truelly building a custom home , it may be difficult to get the Builder to go along with caring the construction financing. many times the Builder/developer is pardnered up with a local Bank and or Investment group , and home buyers are buying from a fet plan or build cost , not a custom home build. There IS a difference.
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Old 12-29-2010, 02:44 PM
 
12 posts, read 44,857 times
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It is a custom home plan. I am attempting to attain one time close construction and mortgage financing.

Randolph and SSFCU both offer one time close options vs. closing two times.


They will only cover 80 percent of the appraised value. Therefore I am hoping that the appraisal comes in on the high end.
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