New construction mortgages are not normally necessary if purchasing a home directly from a builder. Builders typically cover the building process so that you may obtain a conventional mortgage after construction is finalized. Even though this makes the financing simpler, there remain a few unique aspects of the mortgage process. The details below on the introduction to new construction mortgages discusses this in further detail.
Information Requested for New Construction Mortgages
You will always submit financial information and a purchase and sales contract for review when applying for a mortgage. With new homes, you must also furnish information such as a layout, construction specs, and any addendums. Since there is no completed property to view, the lender will use this info to assess the home being purchased.
New Construction Appraisal
An appraisal is a standard requirement for home loan approval. Typically, an third party appraiser must inspect a house in order to complete a report that identifies the value. Since this cannot be done on new homes, the appraisal is separated into 2 steps. Initially, the appraiser will rely on the building plans to forecast the value of the property. Just before closing, he/she will then visit the built home to verify that it matches the building plans. Only then will the mortgage be granted approval to close.
Obtaining Mortgage Approval
There are some additional criteria for new construction in a complex. One important fact is the number of construction phases and houses sold to date. Many mortgage rules set a minimum percentage. This is used to ensure that the development is stable with a likelihood to be finished.
The Introduction To New Construction Mortgages
Upon closing, recurring payments and other repayment terms are the same as that for older properties. Although the initial requirements are somewhat different for new construction, avoiding the requirement for a complicated construction loan reduces the complexity of the sale. For more on the introduction to new construction mortgages or related matters, contact Bradford Pratt at REMAX on the Charles.