New construction mortgages are not typically necessary if purchasing a home owned by a builder. Builders typically finance the construction stage and enable you to close on a normal mortgage when the home is completed. Even though this makes the financing simpler, there are still a few unique aspects of the mortgage process. The details below on new construction mortgages basics includes the most common differences.
Information Required for New Construction Mortgages
With all types of mortgages, you must provide some financial information and a purchase contract for review. With new construction, you must also provide the floor plan, construction specs, and any addendums. Because the finished property is usually not available for showing, the construction specifications are what lenders need to use for underwriting.
Appraisals for New Construction
A sufficient appraisal a standard step in mortgage processing. Normally, an independent appraiser will see a home prior to writing a report that estimates the market value. Since this cannot be done on new homes, the appraisal is divided into two segments. Up-front, the appraiser will use the floor plan and building specs to estimate the value of the home. Before settlement, he/she will see the built property and confirm that it meets the specifications. Only after this will the mortgage be granted approval to close.
Obtaining Mortgage Approval
There are a few additional criteria for new construction in a complex. The most significant consideration is the total number of construction phases and properties sold. Some mortgage rules have a certain percentage. This suggests that the development is stable and most likely to be finished.
New Construction Mortgages Basics
Upon closing, monthly payments and other repayment provisions are no different than for pre-existing houses. Even though the initial steps are a bit different for these homes, not having to obtain an actual construction mortgage has huge value. For more on new construction mortgages basics or related matters, contact Customer Service at Accurate Title.