Construction Loan Advice Please Help (PMI, loan officer, fixed rate, interest)

[Eatmochikn]

We are in the process of building a home. We started with a construction loan from our local community bank. We were approved for $224,000. The bank did an appraisal on the land and the home blue prints to arrive at this loan amount is what we were told by our local banker. We are now 85% complete and my loan officer is telling me that at the end of the construction we can do a 10yr. loan at a 30 yr. term with this his bank @ 4.5% with no pmi and 1% closing. We would be useing the $224,000 appraisal from the construction. If we go outside of this bank to another loan company for a 30yr. long term mortgage he is telling us we will have to have a new appraisal all new legal documents and higher closing cost also he says there will be monthly pmi. His bank doesnt carry long term mortgage loans is what he has told us. Please Help all advice appreciated. Thanks.

[davebarnes]

1. You can always do this loan and then get another one in the next decade. Just make there is no pre-payment penalty.

2. The cost of an appraisal is $400. Not that much.

3. There is no PMI if you put down 20% or more.

4. Tell him you want to do it and you need a "good faith estimate". That should show all the detailed costs.

5. Now, go shopping. 4.5% is somewhat high today.

[chet everett]

I agree that 4.5% is too high an interest rate on a 30 yr fixed mortgage.

Closing costs vary due to local requirements but in general lenders in the same geographic ought to be able to deliver similarly priced loans. Appraisal costs should be far down the list compared to rate -- on a $200K mortgage could easily see a higher interest rate making for a more costly appraisal in just a few months...

[Eatmochikn]

Originally Posted by chet everett

I agree that 4.5% is too high an interest rate on a 30 yr fixed mortgage.

Closing costs vary due to local requirements but in general lenders in the same geographic ought to be able to deliver similarly priced loans. Appraisal costs should be far down the list compared to rate -- on a $200K mortgage could easily see a higher interest rate making for a more costly appraisal in just a few months...

So chet are you saying that interest rates could be on the rise soon?

[Eatmochikn]

Originally Posted by davebarnes

1. You can always do this loan and then get another one in the next decade. Just make there is no pre-payment penalty.

2. The cost of an appraisal is $400. Not that much.

3. There is no PMI if you put down 20% or more.

4. Tell him you want to do it and you need a "good faith estimate". That should show all the detailed costs.

5. Now, go shopping. 4.5% is somewhat high today.

What should we expect for a good interest rate? Thanks for your Help!!

[davebarnes]

Originally Posted by Eatmochikn

What should we expect for a good interest rate?

I have no idea what it happening in Tennessee.
My MA-based credit union is:
30 Year Fixed Rate
Rate APR Points
3.500% 3.548% 0.000%

[thomasdavie]

Originally Posted by Eatmochikn

We are in the process of building a home. We started with a construction loan from our local community bank. We were approved for $224,000. The bank did an appraisal on the land and the home blue prints to arrive at this loan amount is what we were told by our local banker. We are now 85% complete and my loan officer is telling me that at the end of the construction we can do a 10yr. loan at a 30 yr. term with this his bank @ 4.5% with no pmi and 1% closing. We would be useing the $224,000 appraisal from the construction. If we go outside of this bank to another loan company for a 30yr. long term mortgage he is telling us we will have to have a new appraisal all new legal documents and higher closing cost also he says there will be monthly pmi. His bank doesnt carry long term mortgage loans is what he has told us. Please Help all advice appreciated. Thanks.

Hi. Congrats on your new home.

My advice? Take the deal Why? Sure its a 10 year balloon loan but its just to get you through the process until it meets final inspection.

Wait 90 days then refi with a no closing option for much less. Just make the first 3 payments. I dont think pre payment penalties are legal even under these conditions anymore.

What state are you in? With a low closing cost state, then refi with closing costs rolled in with the lowest rate you can find.

If you can put up with a 15 yr fixed, then take that, but 30 year fixed isnt bad either. Hope this helps.

[willow wind]

x2 on take the deal. Here's why I think you should. Your current appraisal is already an old appraisal as it was probably done several months ago. Your house isn't ready so you're not actually going to do a new mortgage just yet.

But guess what. Has the market gone up in your area ? Is it stable or going down? New mortgage with another bank means a new appraisal. No, they won't use the one you have. They need another one done by one of their appraisers that is no older than a few months.

Problem, what happens if that new appraisal comes in at less value than your original appraisal. This happens all the time on new construction. Then you're sunk. Just because it's a new home does not mean you're not losing money on it already.