Today's existing home financing couldn't be more challenging, but for those people that want to finance a custom home, sometimes it's hard to know where to start. I'm asked pretty regularly to describe the process, so I may be overdue in posting it on our blog, but here we go...
If you're still reading this, I assume that you're not interested in paying cash for your new home in Tampa. Kudos to those that can, but I'd guess that happens less than 5% of the time. So this is for the other 95% of us that need financing for a custom home. The first step in this process is to identify who is providing financing for construction homes. I can tell you that if you think all banks do this sort of lending, you will be disappointed. The past few years have severely limited the number of lenders that do custom home financing.
So where to find them? Definitely not in the Sunday newspaper. I'd recommend that the best place to start is to ask your builder who he has used. Like my subcontractors and suppliers, I have to constantly make sure that I am aware who are the best providers in my market for custom home financing. You may also want to ask your friends for referrals as well.
Once you've narrowed down your choice, you'll want to meet with your loan officer to determine what size loan you qualify for to build your Tampa new home. Similar to any loan, you'll need to fill out a loan application that will focus on three key areas: your credit, your debt-to-income ratio, and your liquidity (assets and retirement reserves). You'll need to bring in the most recent copies of pay stubs, your W2 forms, and two previous years' tax returns, as well as recent banking and investments statements. I always suggest you disclose all the good, bad and ugly at this stage. Additionally, you can expect that the lender will be checking your credit score, so it's not a bad idea to check your credit report before making your application.
When you're ready to submit the application and supporting documents, you may have to pay a $300-500 processing fee to the lender. Once everything is received, the loan officer will submit everything to underwriting for review. It typically takes 3-5 days to hear whether you've been approved or denied for the loan. Hopefully you'll receive good news and you're on your way to the next step in the process - selecting the best loan for your needs. We will discuss that in Part 2.
Jon Solomon
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