Many people are passing up a great time to build right now because they fear the trial of going to their own banker and going through all the hoops simply to be rejected in the end. This task seems daunting to many so they won't even try to test the waters. So what are the keys to a smooth easy process that takes the fear out of meeting that giant slayer the banker?
1. The easiest and most straight forward way is to find a bank that is friendly to new construction. Many people are way too loyal to a bank where they have a friend or relative that does their banking, using a bank that is committed to new construction normally will not affect that relationship at all. People believe that because they know their banker then that banker will be able to get the deal done but because of the policies of most banks the ability of your banker to do a loan is usually way out of their control. Simply finding a bank that is willing to do solid financing for new homes will make the procedure very simple without affecting your normal banking with a friend or simply someone a customer has worked with for a long period of time.
2. So the obvious question is to find a bank that is doing new construction loans. The key is to find a builder or realtor that regularly does new construction. They will have a real knowledge of bankers that do these loans easily on a regular basis. There are banks that do these loans and accomplish them for customers with many different credit ratings. Even those with lower credit scores can usually get a very fair loan. Rates are so low that even if you have to pay more because of a lower credit rating the rate will still be a very reasonable rate.
3. Normally a bank has a number of ways that they can arrange a loan to fit your needs that will be most expedient for your position in financing. Some of these ways are: a.fha loans that require only 3% down. These loans are a little more cumbersome and take more time to accomplish but are still very doable, b. 80%, 10%, 10% loans are structured so that a customer puts 10% down and then the bank does a second mortgage for 10% percent after the first 80% mortgage. This is a great way for a buyer that has 10% down but can't get to the 20% that a lot of banks are asking for now. The beauty of this is that the new homeowner won't have to pay pmi insurance that is normally paid for anyone that can't reach the 20% down. c. Usually the banks that are doing new construction are the solid local banks, therefore they have the ability to keep these loans in house which means they are not selling the mortgage out to a secondary market which has many regulations that handicap a lot of loans. When the local bank keeps the loan in house then they can structure the mortgage in ways that will fit your needs and credit ratings. d. if a bank does sell your mortgage to the secondary market then a customer might be required to pay points. A point is simply 1% of the total mortgage. This might fit the needs of someone who has some extra cash but their credit rating isn't quite as good as they hope it would be or have had a rough couple of years but have gotten on their feet and are making a solid income once again, many of us have been there lately. These are just a few of the many options that a solid bank can often times provide to a customer.
4. Make sure to explore the banks and mortgage brokers that provide services to many different incomes and credit ratings. Often times when our great local banks can' work out our mortgage then we take them right to one of our trusted mortgage brokers and they often get the deal done or work with a customer until their finances and credit rating permit them to buy new. Don't be upset or discouraged if it doesn't work out with the first bank your broker or Realtor sends you to.
5. Just remember that banks especially local banks make a fair dollar on new construction and if they are in a solid condition then they will be eager to make you a loan if that is the way they are geared. Often times bankers assure you that they are set up to do new construction but they really aren't able to do those loans because of the decision making that is far above their reach. Be sure to talk to people who know the banking industry and know who to work with. Your local builder should know those people all to well and will be glad to work you through the process.
6. A customer should verify that a bank will do the construction loan and an end loan together and therefore the closing costs are typically way lower and the process is much smoother. A construction loan is simply the loan that happens when the builder is building the home. This loan grows as the house is built and the payouts often times are done once a month. This is a good way to go simply because the bank guards your interests and only pay out on the work that has been done on the home. Before the housing market dropped off this was less true and the banks didn't control it as well. Sometimes the banks cut the checks directly to the subcontractors to guarantee that they are being paid as the work is done. If a customer does use one bank for the the construction loan and another bank for the end loan make sure that you know from your Realtor or builder that both of these banks will have the ability to carry this out instead of getting 3 months into the process before you find out that they really don't have the ability to carry this type of loan out.
7. Hopefully many customers will take advantage of this great time to build and will not let certain banks stand in their way of the American dream. Housing costs are lower , lot costs are typically way lower and there are great tax advantages for most people looking to build new. Go find a great builder that is competitive and build your new home.
Dan Steiner
Comments(0)