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Old 12-08-2009, 03:30 PM
632 posts, read 1,649,771 times
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We're building a house and I'm shopping around for construction to permanent loans (1-time closing). I can pretty much compare closing costs between lenders, but I can't compare the interest rates which "aren't here" yet (can lock 60-days out from completion of home). What's the best way to compare lenders in light of this? Is there even a way?

I was wondering if taking the banks' current mortgage rates and comparing those (for same day, same set of criteria), would that be in any way indicative of how competitive they'd be later on?

Thanks for any ideas, suggestions, etc.!
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Old 12-08-2009, 04:41 PM
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Technically the lenders have to use the standard "past performance is no indication of future rates" line, and in truth they can encounter things that will force them to shift their pricing strategy a bit. The more stable the lender is overall the less likely they will be to change their pricing strategy, so it is not unreasonable to assume that a lender that has been consistently the least competitive will remain the most expensive and the lenders more toward the middle will stay there, the lenders to avoid may be the ones that seem to be undercutting their peers as that can a sign that they are troubled and the FDICis more likely to step in and shift their business to a better funded institution which could really foul up your project. The key is to use the right "peers" so that if you have the ability to shop a few "mega banks" you keep them grouped together, a few regionals grouped together, a few Credit Unions, et cetera.

It is also very important to consider the responsiveness of lenders, as when you are doing construction financing you will need to get the money in draws as work is completed and lenders that are not efficient in getting the draws to you to pay the builders will result in delays for the whole project.

The other thing to consider is be sure to be conservative in your ultimate loan, if you keep the LTV nice and high you can easily refi after completion but if your equity falls below 20% you will be stuck with your lender ...
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Old 12-09-2009, 10:11 AM
632 posts, read 1,649,771 times
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Thanks for the advice, Chet. You've reminded me there's more to compare than numbers only.
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