Home Building: Finding the Right Lender

  • By Jeremy Thompson
  • 15 May, 2013
Contrary to the belief that securing financing is simply about credit scores and income levels, it’s certainly not. With somewhat tougher lending and credit guidelines, it’s now even more important to find a lender who is honest, forthright and will work in your best interest. Fortunately, with the dropping interest rates, there may never be […] The post Home Building: Finding the Right Lender appeared first on J. Thompson Builders.
Fortunately, with the dropping interest rates, there may never be a better time to secure financing, despite tougher regulations.
When building there is most often times the need for a construction loan while the home is built. After the home is finished, you must pay off the construction loan and refinance the loan into a conventional mortgage loan.
Construction loans are often easiest to secure through a local credit union or a local bank. Local bankers are much more comfortable offering home constructions loans in their area because they understand the local market. However, borrowers of construction loans may have to provide more information to prove they can afford the project. You often can’t apply for a construction loan until you provide building plans, a construction contract and an estimated cost.
See our best advice below for how to find the right lender for you, no matter what type of home loan you need!
Shop around:It can’t be emphasized enough that you should shop around when it comes to finding a lender. Compare rates and terms of mortgages until you find the best deal, and don’t forget to factor in hidden expenses such as closing costs.
Credit unions:Check out your local credit union. As mentioned, they are more apt to work with borrowers in their communities. Credit unions are typically known to offer lower mortgage interest rates and low to no fees. They also offer personalized service and may be able to close on your loan quicker.
Mortgage brokers:Consider a mortgage broker. They act as a middleman and shop around for the best rates with different lenders. A broker’s goal is to match you with the loan product that best meets your needs and is the lowest price. A mortgage broker should be motivated and be willing to put in the hard work necessary to get you the best loan possible, while also working with the appraiser, title company and insurance company to make sure the process goes smoothly. Mortgage brokers may or may not be state regulated. Check with the National Association of Mortgage Brokers or the Better Business Bureau to find out if a broker is in good professional standing. When working with a broker, understand the loan process and typical fees, and ask questions if you don’t understand. After your loan is approved, you will work directly with the mortgage service provider.
Word of mouth:With so many options out there, it can be difficult to sort out who may be the best to work with. Word of mouth is the oldest form of advertising, and usually the best. Talk to your friends and family about what lenders they used when they purchased their home. Ask them what they did or did not like about their particular lender during the process.
Be careful online:There are plenty of deals online, but not all deals come through a reliable broker or lender. Know who you are dealing with.
Additional Tip! Lock it in:A low mortgage rate is just a quote until it’s locked in. Mortgage rates can change as often as several times daily. If you want to guarantee you’ll get the rate you’re quoted, ask your lender or broker to lock it in.
Next Steps:
Photo Credit, StockMonkeys.com

J. Thompson Builders Blog

By 7052540976 15 Nov, 2017
Some of these considerations may not be in the forefront of your mind, but there is a long list of aspects you need to consider when building a new home. These should help to get you started thinking about some of the most important pieces of the home building process.
By 7052540976 15 Oct, 2017
This home is being built with our client’s specific wants and needs in mind. The homeowner
requested a single family home with a modern contemporary house design. Previously, he lived
in a townhome and desired a more private, spacious residence. A main floor living with a large
space to entertain and big volume ceilings were a must on the client’s list.

The client decided building as opposed to finding a pre-existing home was a better solution for
him because he wants something specific to his needs. He already had the perfect location in
mind and it was time for him to own his dream home.

The area is ideal for this client because it allows him to live in close proximity to his hobbies and
interests and it also allows him the ability to walk to nearby restaurants or bike to the
surrounding shops. This homeowner will be close to everything. He truly loves the location!
The design concept picked is pictured below. In sticking with a contemporary influence, the
design has clean, simple lines that will result in an extraordinary modern home. We combined
elements of residential and commercial materials and design to bring our client’s unique requests to life.
By 7052540976 15 Sep, 2017

You decide that you are ready to build a custom home for you and your family. Now it is time to figure out how to finance your dreams!

Let’s start with the basics. As with any loan process, do your research. Talk to several mortgage companies that specialize or have a strong understanding/history of working with construction loans. Ask questions and voice your concerns. Companies of course want your business, but they also want to make sure they are a good fit for you and what you are wanting to accomplish. Reviews and referrals are strongly regarded these days. They want to make sure you have the best experience possible.

There are several main differences between a construction loan and a regular existing home loan. An individual construction loan may require a longer credit history  or a higher credit score as well as more money down and along the way. It is more of a process, but it is most certainly worth it. With the right builder, the more involved process becomes a piece of cake; but, that is an article for another time.

Home loans can have a 30 year term whereas a construction loan typically has a max of 1 year. “The rates on this type of loan are higher than rates on permanent mortgage loans. To gain approval, the lender will need to see a construction timetable, detailed plans and a realistic budget, sometimes called the “story” behind the loan,” as reported by  bankrate . While your home is being built, it is typical to make interest-only payments. 

If you are thinking, “I don’t have enough money to pay off a newly built home in 1 year!” Don’t panic.

A popular option is the construction-to- permanent financing sometimes called “one-time close,” a “single close,” or an "all-in-one" loan. Upon completion of construction, the remaining loan balance is converted into a permanent mortgage with terms up to 30 years. Like most loans, “the rate and other terms of the permanent mortgage are set up-front when the entire loan package is closed” according to the  National Association of Home Builders .  Construction/permanent loans are offered by many different lenders, including banks and mortgage companies and are a great option for those of us wanting to finance their home purchase over an extended period of time.

Another option is a stand-alone construction loan. This type of loan can be beneficial if you currently own your home and want a smaller down payment option.   Read more about stand alone construction loans.

There are many different loan options. What makes sense for one person doesn’t make sense for everyone. Make sure you find the right product for you and your particular project. If you want to talk over some options, contact us! We would love to hear your ideas and figure out how we can build your dream home.

View our work , read our reviews on Houzz.com , and visit our Facebook page to get inspired!
By Jeremy Thompson 01 Aug, 2017
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By Jeremy Thompson 15 Jun, 2017
We’ve offered you lots of advice over the years about building a custom home. Here is a condensed version of some of the most important tips to follow. Get on the fast track to planning your new custom home! 7 Tips for Building a Custom Home Pay attention to your subdivision covenants. Yes, these are […] The post Building a Custom Home: 7 Quick Tips appeared first on J. Thompson Builders.
By Jeremy Thompson 01 Jun, 2017
Whether building a house or undertaking a remodel you have the opportunity to design your house to suit your tastes and needs. There are many flooring options available, each with unique characteristics and design. Since flooring is a long-lasting part of the house it is important to choose the right floor for each room that […] The post 5 High-Quality Flooring Options Available for Your Home appeared first on J. Thompson Builders.
By Jeremy Thompson 15 May, 2017
Building a new home is an exciting time, filled with anticipation and satisfaction as you watch your vision come to life. However, it can also be a little overwhelming when you’re unfamiliar with some of the technical terms. To help remedy this we’ve defined a few of the custom home building terms you may hear […] The post 5 Key Terms to Understand in Custom Home Building appeared first on J. Thompson Builders.
By Jeremy Thompson 01 May, 2017
Whether you’ve just unpacked your first box or you’ve been living in your house for years, chances are there’s something about your home you’ve desired improving. However, before beginning a project there are a few key home remodeling terms you should become familiar with. Understanding these terms will help you navigate conversations with your remodeling […] The post 6 Key Home Remodeling Terms to Understand Before Beginning a Project appeared first on J. Thompson Builders.
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