FINANCING STRATEGY
Home Loans for New Construction
The types of loans available to purchase new construction are similar to resale home loan options. There are 15 and 30 year terms, fixed-rate and adjustable-rate, and FHA, VA, and conventional loan products to choose from. While the builder is likely to provide incentives if you use their preferred lender, you should always shop around for a mortgage. Let’s say the builder is offering a $10,000 credit as an incentive for using their preferred lender. That sounds pretty enticing, but can easily be offset by a high loan origination fee or interest rate. If you find better terms through another lender, go back to the preferred lender to see if they will beat or match the rate and fees.
Once you decide on a loan product and lender, you will need to pay close attention to the timeline. The lender will require a certificate of occupancy before you can close. If you apply too early or if the builder runs into construction delays, your interest rate lock could expire. Generally, a lender can lock in your interest rate for 30 to 60 days. After that, you may have to pay a fee to extend your rate lock or you could be required to reapply altogether. Good communication with the builder and your loan officer is essential when applying for a mortgage to purchase new construction.
