We are really considering building a house. We have all the plans in the works. (if the dollars and cents work out we are going to do it) We have gone through a bank and are preapproved etc.... I heard an ad on the radio about using a mortgage broker vs a lender and cutting out the middle man. I went up on line and searched and just got super confused. (not too hard to do these days) We need a construction loan that will convert to a mortgage. Any experts out there that know the ins and outs and have advice? Thanks!
I've heard the same commercial and agree that it just muddies the water. You just need to find someone your comfortable with and go from there. The both have their pros and cons, I've worked with both and to me, the person doing the job is more important than their title.
We used BB&T for ours 8 years ago. No complications and easily converted to mortgage when house was finished.
LOL You are determined to talk me out of this arent you?? Maybe I can get my 'lot' extracted out of the subdivision???
Haven't done one personally but know others that have, most banks will do a construction loan and then just roll it over to your mortage once the house is completed.
Thanks, yes we are pre-approved with a bank to do it this way. I am looking to see if there are other option besides a bank. The commercial I heard said there were lenders (instead of brokers) and it was a way to reduce the cost. I had never heard of this before and would like to find more info on less conventional ways. (Just in case there really are legit ways out there!!)
Do you have a contractor already, if so you may can ask them, as they get construction loans all the time and might can give you more info!
Aren't those lenders, other than banks, the ones who make subprime loans? If your credit is good, I should think you would get the best rate at a bank.
Hey LJK, My hubby and I just converted a construction loan to a permanent mortgage. I will pm you with the guy we used. Basically with the construction loan, you play the general contractor thereby taking out that middle man.
Great, that is the info I am looking for!! I wasnt sure, and figured since I didn't hear people talking about this that it wasnt a good plan. (but never know if there was a best kept secret) Someone suggested the credit union vs the bank the builder recommended so I will check with them too... I am just not sure what I am comparing. Since rates change from day to day, comparing that is like apples/oranges. Am I looking at closing points?
In NC you can be your own General Contractor. It can save you money or cause you to spend more down the road in a divorce. With a construction loan and with a final mortgage loan. They are 2 completely different things. You can get them both in the same place or not. Look at them as two completely different loans. How it works is like this... You get pre-approved for say $400,000 to build your home. You go to ABC bank for the money. You start building and you accrue $10,000 worth of bills with the grading and foundation. You go to the bank and ask for a draw of $10,000. You can get it by wire transfer to your checking account or in the form of a check. Time passes and many arguments with your beloved hubby and sub contractors later, you are now 4 alcoholic drinks away from needing an AA meeting and you only have $10,000 left on your CL and are sick and tired of building this would be dream home and all you can think about is how much you would love to drowned your husband in the garden tub... err I mean take a nice long hot soaking bath. Ok, sorry, back on target here. I had flash backs. Once you near the end of your CL... you schedule a closing with the lawyers, bank, etc. This is just like the CL closing or any other closing of a house you have bought. You have to get pre-approved/approved again with a lending source of your choice. You can go through the same bank or you can go through a mortgage consultant... whatever... but check out your options. If you don't use the entire 400,000 you got through the CL you only have to repay what you used. BUT if you go over... you have to ask for more. where ever. May the force be with you.
YUP!!! EXACTLY!!! Even to the point of saving money for the divorce lawyer :jester::jester: YOU NEED TO ROLL PATIENCE IN WITH THIS LOAN
Koo, that's exactly why DH and I will never build a house from the ground up. It took us 3 hours to agree on the carpet and vinyl for this one. No way in hades I'm going to torture myself by building. :mrgreen: You made me laugh though!
You should get a commitment letter from the bank or credit union, guaranteeing the rate until a certain date. Then you have to close by that date, or the rate could change. Your truth in lending documents should show a figure for APR, which includes the points calculated over the life of the loan. You can use that figure to compare interest rates I'm not sure I'm being clear about what I'm saying here. Let's give a couple of examples, and these will be figures pulled out of the air, not from real life. Suppose one lender offers a mortgage at 6% and no points, and another offers 5.75% with one point paid at closing. There is no way to compare those two raw figures, without more information, but if you look at the APR on each one, that will show you which is really the better deal. Assuming you plan on keeping the property for the life of the mortgage, and paying it on schedule. If you plan on selling the property or paying off the mortgage in a couple of years, you might be better off with the loan with no closing points, even if the interest rate is a little higher. Hope that was helpful, and didn't just muddy the waters.
