"Need to Knows" When Buying New Lenox - Chicagoland New Construction

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Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI
http://actvra.in/52SD

 

"Need to Knows" When Buying

New Lenox - Chicagoland New Construction

 

 


With so many housing markets across the country experiencing a severe shortage of existing homes for sale ... in growing numbers, new construction homes are garnering serious consideration from home buyers ... 

There are a variety of factors at play explaining this growing interest in new construction.  The fore-mentioned supply shortage is just one.  Certainly, the condition, location, and features found within many of the existing homes found on the market are also contributing to their sale numbers falling short of expectations and hopes.  

The "new car smell" or prospect of being able to personalize and semi-customize a home is moving many prospective home buyers to consider new construction as an option too.  Who wouldn't consider this option an exciting one?

But if the purchase of a New Lenox- Chicagoland new construction home sounds enticing to you ...  there's a few "need to knows" you should be aware of prior to your home search and purchase.  

As with any home purchase:  It's best to start with an understanding of the home buying and financing processes.  

With a new construction purchase:  It's smart to go one step further.  Take the time to educate and familiarize yourself with new construction terminology and a thorough knowledge of the construction process in your area.

In the New Lenox - Chicagoland area you'll find:  

 

  • Most lots are platted, subdivided and owned by Developer/Builders  
  • These new construction homes are marketed and sold from Model Homes - Sales Offices, most often located within the subdivision being considered for property purchase  
  • Home buyers can semi-customize their home from a menu of features offered by the Builder 
  • Note:  Fully-completed new construction homes are sometimes available within these subdivisions as well.  Minor customizations are sometimes still possible and negotiable when purchasing these completed homes  

 

With this type of new construction purchase:  The Builder typically funds their own construction process (usually with their own banking relationships, or cash).  However, a downpayment fee may still be required by the Builder prior to the start of actual construction or at the signing of the contract.

When the home is completed, the Builder sells the home outright to the new contracted buyer. Previous to this time, the buyer must have secured traditional mortgage financing, according to the agreed-upon Sales Price.  A Closing on the completed home takes placeafter the Final Occupancy Permit is issued. 

Should you be building a home on a lot you own:  You most likely will need to secure a Construction Loan (something not always easily found these days).  

After construction is completed:  You will need a permanent, or "end loan" to pay off your Construction Loan. (Construction Loans are typically a short term, interest only type of loan ... not intended to be for a Fixed Term, such as 15, 20, or 30 years.

Your permanent "end loan" Mortgage will be based upon the "completed" value of your home, as determined by your Mortgage Lender's  Appraisal.   This value estimate is typically in line with the cost or value of the lot, plus the Construction Costs (Labor and Materials). 

In these circumstances, your new "end loan" loan is considered a Refinance.  Loan-To-Value considerations for your loan are based upon the new Appraised Value.

Now that you know the basics of the new construction process, the next step is deciding:

 New Construction Terms & Glossary

  • Which Builder to work with 
  • The location of your new home 
  • The model home you like  
  • The amenities you desire     (and can afford)

 

How do you do that?  

  • Strongly consider working with a Buyer's Agent  
  • Find a new construction Buyer's Agent that knows, understands, and has experience representing buyers in the new construction process   

Ask each Builder you are considering these important questions prior to taking the next big step, signing a Contract:

Do you negotiate the price of:

     1.  Options or amenities?  
     2.  Upgrades, features that are "add-ons" to the base home price?  (Don't assume they won't, or can't, negotiate on price/costs.)
     3.  If offered, are the "free options/upgrades" for using the Builder's preferred or suggested Lender built into the Builder's sales price (is the price "padded")?
  • Ask the Builders (or their sales representative): 
     1.  How are the estimated real estate taxes figured? 
     2.  How are they prorated?  
     3.  Who pays the next tax bill?  
     4.  When does that payment take place? 
     5.  What are my responsibilities (as the new homeowner) in regards to that tax payment and receipt of that tax bill?

Remember:  With new construction, the property taxes for the first year will,  most likely, be minimal.  Once the home is completed, an Occupancy Permit will be issued and the sale Recorded.  The Assessor then acknowledges the sale.  

After the next assessment cycle:  The Assessor will fully-assess the property, back-dating the assessment to the date of Closing.  This typically results in a larger tax bill in the second year of ownership.  

The Lender typically collects escrow monies based on the original low tax bill, which is based on the vacant lot.  Taxes are typically paid in the year following the Assessment or Tax Bill.   

Example:  2016 property taxes will be disbursed throughout Chicagoland suburbs soon.  They are payable in two (2) installments, normally June and September.  (Note: Cook County has its own timetable for release of tax bills.

At the point that your new (increased) tax bills are received, your Lender will "adjust" your monthly escrow payment upwards to reflect the new higher tax bill amount (attributed to the completion of the house on a previously "vacant" lot).  This catches many new construction homeowners unaware.  

(See my post "Love Your New Construction .. But Educate Yourself About Future Tax Bills" for further info and explanation regarding this.  Contact me if you have questions.)

 Your Mortgage Lender will now require one of two things:     

     1.  A sizeable "lump sum payment" made to your escrow
     ... or
      2.  A significant monthly escrow payment increase to help you "catch up" on the shortage in escrow

The bottom line for new construction Buyers is:  

There's a lot to know and consider before you make a final decision regarding a new construction purchase. Be aware of this fact and take steps to ...  

Educate yourself.  Do your homework.  Ask questions of your Builder (and Lender) prior to making final decisions and contracting for your home purchase.   

You'll be very glad you did, especially at property tax time ...   


 Contact Gene Mundt to Find Out More
    
        
* Hoping to buy new construction, an existing home, or refinance a home in New Lenox or elsewhere in the Chicagoland area?  Contact me!  I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf.
I'm easily found at:

Gene Mundt

Mortgage Originator - nmls #216987 - IL Lic. 031.0006220 - WI Licensed
 
American Portfolio Mortgage Corp.

nmls #175656
 
Direct: 815.524.2280
Cell or Text: 708.921.6331
eFax: 815.524.2281
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

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Groups:
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Advice for Buyers
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Tags:
construction financing
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buying new construction
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Rainmaker
3,179,235
Dorie Dillard
Coldwell Banker United Realtors® ~ 512.346.1799 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ,

Great information for buyers purchasing new construction. Most of the lenders here calculate your property taxes on the current tax rate rather than on unimproved property..they don't want a surprise for the buyer when their tax bill comes due!!

Apr 11, 2017 03:48 PM #1
Ambassador
2,549,568
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Gene - Very thorough walk-thru of the new construction purchase process, and very useful for buyers considering this option. As an aside, we have sold many new homes over the years, and, off and on, builders offered incentives for using their lender. Those incentives, while sometimes valuable, never came close to the amount they were advertised to be.

Apr 11, 2017 04:17 PM #2
Rainmaker
2,461,269
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Good luck with your new construction and many more to come in the year.
!

Apr 11, 2017 11:53 PM #3
Rainmaker
2,349,518
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker

Good morning Gene. The real estate tax issue has ruined the dreams of many new construction home buyers. Enjoy your day!

Apr 12, 2017 05:26 AM #4
Ambassador
3,339,573
Jeff Dowler
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

Hi Gene

Great information for those buyers interested in new constuction purchases - they ARE different from resales. Builders here offer incentives for using their prefererred lender but you have to compare costs as it may not be the best deal.

Jeff

Apr 12, 2017 07:04 AM #5
Rainmaker
2,182,983
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Add general Real Estate consultant to your tag-lines and marketing please Gene

Apr 12, 2017 08:29 AM #6
Rainmaker
591,094
Kasey & John Boles
Jon Gosche Real Estate, LLC - BoiseMeridianRealEstate.com - Boise, ID
Boise & Meridian, ID Ada/Canyon/Gem/Boise Counties

This is a great walk through of Chicagoland New Construction, and much of it is very similar to our area.  Our taxes are so complicated for people that aren't familiar with them anyway, and new construction the first year is even trickier.  -Kasey

Apr 12, 2017 02:55 PM #7
Rainmaker
2,425,882
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale - Probate Broker

Gene,  there is so much important and valuable information here for buyers. The supplement tax bill is something that grabs a lot of buyers - even though they were told and educated about the supplemental works.  

The bill is generally much larger with new construction and the surprise that much more of a WHAT IS THIS !!!

Apr 12, 2017 02:56 PM #8
Rainmaker
1,352,567
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good Morning Gene - New construction is very exciting.  I have had both established builder with the sample as well as the spot builder on a single lot.  They both are handled slightly differently.  I think you mentioned almost everything.

Apr 14, 2017 04:49 AM #9
Rainmaker
1,881,820
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

A well deserved Feature, Gene!

My husband and I are currently looking for a home and finding nothing available. We would love to build, but finding land has been just as difficult. I have bookmarked this in case we go the "new build" route.

Apr 14, 2017 05:49 AM #10
Rainmaker
4,235,649
Roy Kelley
Realty Group Referrals - Gaithersburg, MD
Roy and Dolores Kelley Photographs

Congratulations on your feature recognition. This is excellent advice to share with those who are considering new construction.

Apr 14, 2017 07:08 AM #11
Rainmaker
3,202,506
Lou Ludwig
Ludwig & Associates - Boca Raton, FL
Designations Earned CRB, CRS, CIPS, GRI, SRES, TRC

Gene

An outstanding post on what buyers need to know when there buying new construction.

Good luck and success.

Lou Ludwig

Apr 14, 2017 07:28 PM #12
Rainmaker
2,461,269
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

These are pretty good as well! All the best in the world and everything

Apr 18, 2017 11:18 PM #13
Rainmaker
2,461,269
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I'm just going back to this to see if there some universals I can take on this level for New York and LA. Thanks for posting once again!

Apr 19, 2017 04:29 PM #14
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Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi

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