Finding the right lending partner can be a daunting task. Most homebuyers will immediately go to the financial institution that they currently use for personal checking or savings. However, when purchasing new home construction, that might not be the best choice. Most lenders focus on resale homes – not new home construction – which means they might not be used to the ins and outs of everything that goes into purchasing a new home. There are a lot of variables including design options, lot choice, construction timelines, and more that can impact how and when you close. That is why we have pulled together this quick guide with some recommendations on finding the right partner to finance your home.
Find a Lender that Understands New Home Construction
As we mentioned above, most mortgage lenders focus their efforts on resale homes because the resale market is much larger than the new home construction market. There is a specific formula for approving a mortgage for a resale home because the home already exists and comparables (or “comps”) are easy to find. Underwriting a mortgage for new home construction is completely different because there aren’t any comparable homes. Your home will be unique based on your preferences. Be sure to carefully study mortgage lender websites to see if they have team members who specialize in new home construction mortgages.
Mortgage Rate Flexibility
When purchasing new home construction, you often must wait for the home to be built. That could take upwards of six to eight months. Unlike the standard 30-60 day closing timeline for a resale mortgage, a lot can happen in six months. That is why lenders who specialize in new home construction mortgages often offer mortgage rate flexibility. This allows the buyer to secure a lower interest rate if rates drop during the waiting period while the home is built. This could end up saving buyers tens of thousands of dollars in the long run.
Home Builder Lending Partners
One of the first things homebuyers should do when selecting a lending partner for new home construction is to see if the homebuilder has any relationships with financial institutions. These lending partners are often listed on the homebuilder’s website. Oftentimes, selecting a preferred homebuilder lender is the easiest way to save money. These lenders can help expedite the closing process, because they have an established relationship with the homebuilder. They might also be able to find savings on closing costs and other benefits which can save you money. Be sure to check your homebuilder’s website to see if they have lending partners and schedule an appointment.
At HHHunt, we believe it’s how you live that matters, and we want all our homeowners and potential homeowners in our master-planned communities to have the home of their dreams. We hope these tips are useful while you start your new home journey.