Home Building Mortgage
You’ve done some looking around, and you just can’t find a house currently in existence that matches up with what you’re looking for. You decide that maybe a brand-new build is what you’re looking for.
The good news is that you can get a loan on a newly constructed home. There are just a few things you should know going into the process.
Appraisal and Final Inspection
You probably want to move into your new home as fast as possible, and we want to help get you there. However, brand-new homes may require some additional appraisal and inspection procedures if they’re still being constructed when you apply for your loan.
In the case of homes under construction, Quicken Loans requires an initial appraisal as well as a final inspection.
The initial appraisal can be done once the builder confirms the drywall process is finished and you’ve chosen any upgrades that will be going in the house.
A final inspection is ordered when your builder confirms that construction is complete. This is another point when timing is critical in order to get you in your house as planned.
The government’s Know Before You Owe rules require that lenders give you a three-business-day window in which to review your Closing Disclosure before you can officially close on your mortgage. There’s no way to skip this, so you’ll need to plan on this being part of your timeline.
In order to give enough time for the inspection to get done and leave time for the waiting period, we recommend the home be 100% finished two weeks prior to your scheduled closing.
Finally, it’s important to note that if the appraiser finds that the home is not 100% complete at the time of final inspection, there may be additional costs associated with follow-up inspections.
Estimates and Final Figures
Because you don’t get the loan until the home is complete, there are situations in which your estimated loan costs can change before and after the home is complete.
If you choose to float your mortgage rate, meaning letting it move along with the whims of the financial markets in hopes of eventually being able to lock in a lower rate, your Home Loan Expert will quote you estimated costs based on current mortgage rates. If rates end up being higher when you choose to lock yours, qualifying factors and the amount you need to bring to the closing table may change from original estimates.
Another factor that’s likely to change is the amount you have to put in escrow for taxes. This has to do with the way property taxes are initially calculated. The amount you first pay in taxes is often based only on the value of the land, if there was nothing there before. Once a local taxing authority such as your county, city or school district knows you built a house on the property, therefore making it worth more, your next tax bill may be higher.
In some areas, local authorities may choose to send you a supplemental tax bill for the difference between the “land-only” and “fully-assessed” taxes.
If your new home will be part of a homeowners’ association, please let your Home Loan Expert know what the monthly dues will be as soon as you have that information. This is crucial in properly calculating your monthly debt-to-income (DTI) ratio.
New construction can take longer than buying an existing home. Because of this extended timeline, you may be asked to provide updated documentation including bank statements and pay stubs to ensure that nothing has changed in terms of your qualification. We’ll be sure to communicate with you throughout the process on anything we need.