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Best rates for new construction home loan.
Posted on 6/14/23 at 11:20 am
Posted on 6/14/23 at 11:20 am
I'm new here and sure this has been brought up in the past. We bought some land last year and have had plans made already. We got quotes and are ready to build our forever home. Is it the perfect time with the climate of things, probably not... but that's where we are now and we can always just refinance when rates go down. We are building a very simple and modest home well within our means, but still want to get the best rate we can. Any pointers for lowest fixed rate with 800+ credit? Anything from 15-30 year fixed. Will be putting at least 20% down. Thanks in advance.
3
Posted on 6/14/23 at 6:02 pm to WokeAF2024
I’m in the process now. From what I was told there are two options. A one time close and a two time close. I did the two time option because I believe rates will be lower when my home is finished. Banks would only quote me rates within the current environment so I’m kind of gambling here. I received a construction rate which is higher than the prime rate. I think mine is 8.75% and is interest only during the build. Once I near completion my lender will begin to look at where rates are and lock me in.
Edited to add we are 740+ with 20% down
Edited to add we are 740+ with 20% down
This post was edited on 6/14/23 at 6:03 pm
Posted on 6/14/23 at 7:49 pm to WokeAF2024
No rate advice but some other things learned:
Can be a bit tricky sometimes with land already purchased (if financed). If cash, sometimes they will count towards down payment.
Whenever you start, really make sure contractor has their shite together and nothing standing in the way of finishing. Do all the planning you can up front. Not fun having interest only drag out for a year + waiting on something small (garage door for example). Especially since you will be paying interest on the full amount in the end.
Make certain there is a good contingency for overrun costs within the loan.
Consider financing the interest payments. Since you own the land, chance the loan to value is within range to actually include the interest into the construction loan. You are actually drawing on the loan to pay your interest. A bit more in interest but keeps the cash free.
Also, really track those soft costs you have up front on house. Some of them can be paid back…surveys, architect, land permits, perc
Can be a bit tricky sometimes with land already purchased (if financed). If cash, sometimes they will count towards down payment.
Whenever you start, really make sure contractor has their shite together and nothing standing in the way of finishing. Do all the planning you can up front. Not fun having interest only drag out for a year + waiting on something small (garage door for example). Especially since you will be paying interest on the full amount in the end.
Make certain there is a good contingency for overrun costs within the loan.
Consider financing the interest payments. Since you own the land, chance the loan to value is within range to actually include the interest into the construction loan. You are actually drawing on the loan to pay your interest. A bit more in interest but keeps the cash free.
Also, really track those soft costs you have up front on house. Some of them can be paid back…surveys, architect, land permits, perc
This post was edited on 6/14/23 at 8:42 pm
Posted on 6/15/23 at 11:00 am to WokeAF2024
All good points I'll definitely keep in mind. Thanks
Posted on 6/16/23 at 10:40 am to WokeAF2024
We just did a land loan to purchase land and will be taking out a construction loan to start building in around 1 year. Downside is you have two closing costs going this route. If you are buying land then building immediately then include the land purchase into construction loan and you will only pay closing cost one time. We are going through a credit union which had the best rates after shopping around. Hopefully traditional mortgage rates will be better in 1.5/2 years when we start occupancy and lock in the mortgage rate. The land loan is a 20 year, 10 year balloon because we will be refinancing way before the balloon payments hit.
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