Many customers want to know how they can become a homeowner, essentially wondering how they can finance a home.
Getting a home loan to build a house is a little different than buying an existing home. The pre-qualification is the first step to determining which program works best for the customer and what budget and house payment they can afford. Once a pre-approval is in place, a loan officer will review the steps involved with a construction loan, explaining what to expect, out of pocket expenses, and in some cases explain how 100% construction financing works. The pre-qualification process requires limited information, including name, income information, social security number and authorization to run credit report to determine liabilities and financial responsibilities. Once the proposed lender has the pre-qualification information completed, they will be able to tell you how much home you will qualify for.
When a customer comes to America’s Home Place, picks out a house and receives a pre-qualification, the next step is to complete a full application package. Once this step is processed the results will give the breakdown of the approximate closing cost and an appraisal request will be placed on the property to be built. It typically takes 7 to 10 days to get an appraisal back on the property and at that time the lender will submit for the permanent loan approval and closing will generally take place within 30 days. Once the loan is closed construction funding will be made available and construction on your new home can begin.
The approval process for lenders may vary. Home buyers should be employed for about 2 years with a steady source of income. All parties must meet the minimum credit score requirement, which is typically 620. In some cases lenders are able to provide tips to increase the credit score when needed.
Debt to income ratios have to be reviewed, and usually do not need to exceed 41%. This will allow the lender to know how much house you will likely be approved for. If you complete a pre-qualification and your credit score isn’t quite high enough to qualify for permanent financing, Hamilton Bank has a lot of tools they can use to help determine what factors are needed to increase your credit score. In many cases there may be a few things needing correction or paid in order to bring the score up as quickly as possible.
Some red flags may include high balances on credit cards and reducing these balances can help improve the credit score. America’s Home Place is not affiliated with Hamilton Bank, but does work with them as one of their preferred lenders available to serve new homeowners. Once the loan is established, the lender will explain how and why interest payments are due while the home is being built and it is recommended at that time to secure the initial years homeowners insurance. If there are changes during the building process, a customer may want to verify their approved funds will cover the expense and in some cases these budgets can be increased if necessary. If you are unsure, check with your lender or inquire with a Building Consultant for more information. Once the home is built the lender attempts to convert the construction loan into a permanent loan within 10 days. After the conversion of the loan, the first home payment is typically due within 30 to 45 days.
Some loans offer 100% financing, including VA loans and USDA loans. In order to find out what loan you may qualify for contact your local America’s Home Place office here.