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Old 02-04-2014, 09:32 PM
 
12 posts, read 117,130 times
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I have a contract for a new construction home in NJ which will be delivered in 4 months. Right now they've just dug up the hole and there's no improvement. The lender is asking me to authorize and charge me for an appraisal. I've told them we're at 105 days of the delivery date and the house is less than 1% built and that we should wait. They're saying it has to be done within 30 days of the loan application and that federal guidelines require an appraisal in the system for them to continue processing the loan. Is this true and required by the law or is this way to lock us in?
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Old 02-05-2014, 12:06 AM
 
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There does not need to be a house on site for the appraisal to be done. The lender is not going to loan you money unless they know that what you are planning to build is worth what you are asking to borrow.

The appraiser will visit the site, will get a plat map of the site. You or the builder will provide the house plans and building specifications of the house to the appraiser. That all that's needed for the appraisal.

The lender is not trying to make your life difficult. This is standard operating procedure.

If you are building this house yourself, we'll assume that you will want to have a variety of cash disbursements during construction to pay off the contractors as you go along. The lender is not going to give their money to anyone unless they believe the house is worth the value you have placed upon it. Thus, the appraisal.

You do have another option. People sometimes do wait until the house is built before they go for a mortgage. However, they hold off makng mortgage application until the house is almost fully complete. This is common with FHA & VA financing as people don't want to go through the mound of paperwork and certifications necessary for proposed construction loans using FHA or VA financing.. In those cases, you would need a builder willing to build you a house in the hopes that you could finance it when it was complete.

You would write a contract, give a down payment and let the building proceed. If when complete, if you can't finance it, the builder keeps the deposit and sells the house to someone else. You could do this with any kind of loan if you found a builder willing to go along with it.
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Old 02-05-2014, 01:04 AM
 
Location: northern va
1,729 posts, read 2,622,070 times
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last new construction, lender sent appraiser out three times.. once while in studs, once a couple days prior to settlement (with minor electrical fixtures left to be attached), and then finally the day of closing..

charged my buyer for two extra visits. I wasn't happy
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Old 02-05-2014, 06:25 AM
 
12 posts, read 117,130 times
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Or maybe I just have to start the application process 30 or 60 days before the delivery date. The problem with appraising now is that I won't be able to switch lenders down the road if I need to. That appraisal is only valid for 6 months, is charged to the borrower, and you can't reuse the appraisal in applying with another lender.

This may be standard practice, but it's also a way to lock in people and hold them hostage.
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Old 02-05-2014, 09:16 AM
 
3,020 posts, read 8,055,760 times
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Quote:
Originally Posted by HectorGdiazG View Post
Or maybe I just have to start the application process 30 or 60 days before the delivery date. The problem with appraising now is that I won't be able to switch lenders down the road if I need to. That appraisal is only valid for 6 months, is charged to the borrower, and you can't reuse the appraisal in applying with another lender.

This may be standard practice, but it's also a way to lock in people and hold them hostage.
It's also a way to protect lenders against flaky borrowers who tend to waste the lender's time, money and resources by switching to someone else at the last minute. Do your homework and check out your lender before applying for a loan.
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Old 02-05-2014, 11:07 AM
 
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Yeah, but how are you supposed to "shop around" for the best mortgage rate and conditions?
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Old 02-05-2014, 11:39 AM
 
Location: Boise, ID
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As a builder who has had houses we DIDN'T build because they wouldn't appraise enough for the buyer to close without bringing large amounts of cash to closing, I'm really glad they do it this way. For a few years in my area, the market value of new construction was significantly less than the cost to build the house, so no one was building. We required the buyer to get plans and specs appraisals done before we would even turned the plans in for a permit. Saved everyone money in the long run.

How would you feel if you had $20k in nonrefundable earnest money paid, got the whole house built, and then couldn't afford to close on the house, based on the appraisal, and had to walk away from your $20k with nothing to show for it? Wouldn't you rather know that early on, when the EM was still refundable? How would the builder feel knowing he can't sell your house for what it cost to build? That is why this is standard.

Usually a "plans and specs" appraisal, and a follow up near closing to make sure the finished product is as good or better than the specs.

If you want to shop around, do it right up front, before the appraisal is done. If you want to change lenders, you may have to figure in the cost of another appraisal fee.
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Old 02-05-2014, 06:24 PM
 
Location: MID ATLANTIC
8,370 posts, read 21,458,575 times
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In the case of new construction, we collect the appraisal fee at application, but do not order it until we are at drywall stage. But first, we issue credit approval within 30 days, subject to satisfactory appraisal and completion.

On a conventional loan, when we are at drywall, we verify final sales price, and order the appraisal. On a VA or FHA we wait until 95% complete before we order the case number (which is issued for the appraisal). But in both cases, a credit approval is issued within the first 30 days. Think about it....even if you have a full appraisal where there is a hole in the ground, the house still has to be built to get the loan. And then, you risk the appraisal being outdated by the time you close and require an update.

I totally get collecting the money. I wouldn't want to waste my staff's time processing a loan for someone that wasn't committed to pay for his apppraisal.
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Old 02-06-2014, 07:35 AM
 
12 posts, read 117,130 times
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Yeah, I get what you're saying from the lender's perspective. The question is, is this by law that the appraisal must be performed 30 days (or less) from the application, or just a convenient guideline set by lenders to protect themselves?
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Old 02-06-2014, 10:52 AM
 
4,787 posts, read 10,884,218 times
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OP- something is not making any sense.

You say you've made mortgage application. Then you say you say, down the road, you want to shop around for the best rates. If you want to shop around a couple of months from now, why are you applying for a mortgage as of this date?

Do you need some mortgage approval on paper from a lender today to keep your builder happy ? But you are not going to be committed to that lender to actually close the loan through them as you may find someone else with a better rate in the future ?

In other words, are you playing games with lender # 1 ? Are you just using them and wasting their effort & time. You want something from them ( a mortgage commitment perhaps) but are not willing to pay for the appraisal that would help you get that.

To answer your question, there is no law that requires when the appraisal has to be done for a lender. It all depends on the lender and their policies. Their money, their terms. Appraisals are only good for so long and depending on the lender, an appraisal done today may require an update down the road.

Perhaps you need to think some more on how you want to approach this construction project. Are you basically the type of person who wants to make mortgage application about 30- 45 days before completion
of the house? This is more the existing new construction, never occupied type of loan you want. You don't seem to want a true proposed construction type of loan.

If you need a mortgage commitment very soon to satisfy your builder, then you may have to realize that you're going to wind up paying two application fees, two appraisals, etc. as you wander from a lender who can give you a commitment today to one with a better rate in four months. However, FHA & VA loans are good for six months and are fully portable from lender to lender for that amount of time.
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