When buying a home from a builder, a complicated construction loan is not often necessary. Builders often finance the construction process and allow you to use a regular loan when the building is completed. Even though this makes your loan process simpler, there remain a few differences in the loan process to be aware of when buying new construction. The details below on new construction loans basics offers some helpful information.
Information Required for New Construction Loans
With any type of loan, you must submit your personal financial documents and a purchase contract for review. With new construction, you must provide other information including the floor plan, construction specs, and any addendums. Because there is no finished home to physically see, they will use this info to assess the home in question.
Appraisals for New Construction
Appraisals are a common step in loan underwriting. Usually, an independent appraiser must see a property to assess its value. Since this may not be done on new construction, the appraisal is divided into two segments. First, the appraiser will use the floor plan and building specifications to guestimate the value of the property. Just before settlement, the appraiser will then inspect the constructed building and verify that it meets expectations. Only after this can a loan receive final approval.
Other Loan Conditions
With new homes in a development, there are certain details about the development that are scrutinized. One important fact is the total number of construction phases and properties sold thus far. Some loan rules set a percentage threshold. This is used as a sign that the complex is solid with chances to be finished.
New Construction Loans Basics
After closing, the loan terms are identical to other types of properties. Even though the up-front requirements are a bit different for these homes, not having to obtain an actual construction loan reduces the complexity of the process. For more on new construction loans basics or similar matters, contact Bill Kuhlman at Kuhlman Residential.