Thursday, December 5, 2013 - Article by: Gene Mundt - American Portfolio Mortgage Corporation -
Dreaming of New Construction: Have you Picked Out your Will County or Chicagoland Lot?
New construction has always been a strong indicator of how our economy is doing. Seeing new construction pop up? The economy is healthier ...But new construction is also a good indication of the mindset of Bankers and Lenders. If you're seeing new construction ... money is flowing a bit more freely.
After a long dry spell in Will County and much of the surrounding Chicagoland area, new construction is once again being seen. I was out in my hometown of Manhattan on Thanksgiving and there are new homes and construction dotting all the newer subdivisions. Other surrounding communities are experiencing much the same. It's a very uplifting sign.
So if you are dreaming of building your own new home, now may be the time for you to take action. But where do you start?
Here's some helpful tips and "must do's" for those hoping to become new construction Home Buyers in Will County and elsewhere in the Chicagoland region:
1. Secure your property ... If the property you want is a vacant lot and you are in need of financing for its purchase, know that: Lenders typically require a 25% to 30% Down Payment on vacant lots.
If you already own a lot, the current Value of your lot will be determined by a recent Sales Price or Appraisal. The equity represented by that Value can than be used as the Down Payment or "Equity Position" needed for Construction Financing.
If the residential property is an already started, but not completed new construction home ...
Financing may be available for this form of purchase as well ... but with contingencies. This type of purchase must be considered by the Mortgage Lender on a case-by-case basis as there are many factors that can/will enter into the "lendability" of the property and the success you find in financing it.
2. Secure Construction financing ...
To accomplish successful Construction financing, you will need a Contractor's Sworn Statement signed by the General Contractor. The signed Statement must detail the total Cost of Construction.
As with any mortgage, you will be required to demonstrate your ability to re-pay the loan (Qualifying Debt-to-Income Ratio). To fulfill typical lending requirements, you will need:
Sufficient Down Payment or Equity (usually 25% of the Total Estimated Value of the completed construction)To prove sufficient Employment History and IncomeTo prove a satisfactory Credit Rating
3. Secure a Commitment for financing for the End Loan (final Mortgage) ...The final Mortgage pays-off the Construction Loan when the house is finished, inspected, and a Certificate of Occupancy Permit (COO) is issued by the governing municipality (City, Village, County, or entity that overseas that process).
Please note: Many Mortgage Lenders can and will do both the Construction Loan and the End Mortgage, providing a seamless process and financing experience. Banks typically prefer to provide the Construction Loan only.
Sometimes, you can avoid some costs by using a Mortgage Lender that will offer a "Construction to Perm" program ... (Perm meaning Permanent or End Mortgage). So make sure you ask regarding this important matter. Don't assume.
Also remember: Most Construction Loans are unique loans. Payments are usually Interest Only payments ... monthly payments figured upon the "used" or drawn portion of the monies financed during the construction process. The monthly Interest payments made during the construction period/Construction Loan do not pay down the principal balance of the overall debt.
Many banks or Mortgage Lenders make 4 to 5 larger construction payouts as the home is being constructed and documentation is provided representing completed work on the home. Other Lenders will allow unlimited draws.
It's good news that new construction is on the mend in Will County and most of Chicagoland ... and interest is rekindled in building homes. It's also great news that the availability of money and financing has also re-emerged in tandem with that new construction market.
But perhaps the best news is: A menu of options exist for you, should you hope to build soon ... or in the near future. To secure the most advantageous and fluid financing option available, contact me. The sooner we start to map-out and implement your personal options, the better. Contact Me Now with your new Construction and Mortgage financing questions ...
* To get the answers you need prior to building a new home in Will County or elsewhere in Chicagoland ... or to receive information on financing any home or Refinance, contact me. I'll be happy to hear from you and assist you with your questions and needs.I can be easily found at any of the following:Direct: 815.524.2280 Cell or Text: 708.921.6331 eFax: 815.524.2281 firstname.lastname@example.org
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