Financing Your New Home

Video Overview

What can you expect in the pre-approval process and approval process and for the construction loan? This blog post will answer that question.

Pre-approval process

What can customers do to prepare for the pre-approval process?

  1. Get a credit bureau of your own
  2. Go and make sure there’s nothing on the credit bureau that doesn’t belong to you.
  3. Make sure the information is correct
  4. Don’t go around and apply to banks everywhere
  5. Gather up documentation
    1. 12 month bank statements
    2. 2 years of income taxes
    3. Other assets
  6. Be realistic

The homeowner can now take that number to their builder and design a house that meets their needs within that budget. Now you’re back on the bank, what happens next?

Approval Process

What can customers expect in the approval process?

  1. Order an appraisal
  2. Set up the construction loan
  3. Open an escrow account
  4. Add a title company

What does the title company do?

They manage the funds and they manage the draw schedule.

What’s a draw schedule?

  • Through each stage of the construction process, the title company would issue money out to the builder as they complete each stage
  • The buyer would make an interest only payment based on the balance that’s carried at the time

Hopefully, then, the homeowner can roll over to a build-to-construction loan, where it’s interest only payments, to permanent conventional mortgage, so usually 15-30 years are common terms.

That pretty much covers the finance process from start to finish.