New Construction Lending
Yes, banks are still lending money for new construction. There are not as many banks that are doing it, but new construction lending for good credit buyers is readily available. We created this page to help answer some of our most frequent questions.
Does Old World Classics have a preferred lender?
Yes. We use Home Savings. Our contact there is Jim Nelson. His phone number is 330-315-6486 and his email is jnelson@homesavings.com. We will use any lender you choose however our clients have found that Home Savings has consistently offered the best rates and construction financing packages for them.
How much downpayment do I have to put down?
The downpayment size is going to depend on several factors including the location of the home, price of the home, your credit history, and appraisal. For a conventional 30 year loan up to $417,000 the downpayment can range from 5% to 20%. As you get into the Jumbo mortgages over $417,000 you could be asked to put more than 20% down. To get a better idea it is best to contact a loan officer and they should quickly be able to tell you what to expect.
How does a construction loan work?
A construction loan typically is an interest only loan during the construction period of 6 to 12 months that will convert into a fixed mortgage at the completion of construction. The bank will disburse progress payments to the builder during construction and you will make interest only payments on the amount of money that is disbursed. You will be able to lock your interest rate in at the beginning of construction.
Can I buy my lot with a construction loan?
Yes. Your construction loan can fund the purchase of your lot and the construction of the home. This is generally less expensive than obtaining a lot loan and then a construction loan, because you will be paying closing costs twice.
Can my lot equity be used as part of my downpayment?
Sometimes Yes. Generally you must own your lot for more than a year to use its equity as part of your downpayment.
Why does my loan amount have to be under $417,000?
Most banks resell your loan to a government entity such as Fannie Mae. The government has set guidelines for what standards a loan must meet in order for them to buy it and one of those standards is that the loan amount cannot exceed $417,000. You can get a loan for over $417,000 however it must be resold on the private market, therefore the interest rate and downpayment are going to be higher.
How do appraisals work?
In order for the bank to fund your loan they will do an appraisal from the blueprints and specification sheets we provide them. The appraisors main consideration will be the location of where you are building and sales within the last 6 months in that area. The biggest key to consider is that you are building a home of less or equal value to the homes within a one mile radius.
More Questions…
I hope these answered some of your basic questions, but I’m sure you still have more. I would highly suggest taking a few minutes to contact Jim Nelson at Home Savings to give you a more complete picture on new construction lending.
Contact
Home Savings
James Nelson
330-315-6486
