If you purchase from a major builder who owns property and plans to build a number of homes on it, your mortgage application process will look similar to one for a preexisting home. It doesn’t matter if the builder is local or national. The only difference is that you’ll apply for the mortgage when you sign the builder’s contract, but you won’t finalize the precise loan terms until the house is finished, or nearly complete.
Here’s where things get a little different. If you decide to hire a local architect and build a custom home, you’ll need to either pay for the project in cash or secure a construction loan. Not every lender offers these, so look around, and be sure to ask your architect or contractor for any financing recommendations. Construction loans come in one of two forms: one-time closing and two closings. One-time closing means that a lender will give you an interest-only loan for 6-12 months as the home is being built, and then after an appraisal, the loan will switch to a fixed rate loan. Since this can be risky for lenders, most require two closings: a construction loan and then refinancing into a standard loan, which entails two closing costs.
Because construction loans are often riskier, they usually have higher credit score requirements, higher down payments, and background checks on both you and your builder, to make sure the home will actually be built. This bars many homebuyers from obtaining such loans, and others who may qualify are deterred by the risk and higher closing costs. Talk to your lender about your financing options, whether you want a newly built home or a preexisting one.
If you’re interested in purchasing, refinancing, or learning about our low down and no down payment financing options in Columbus, simply fill out our Fast Response form or call our local branch at (614) 602-6020. Our experienced mortgage professionals would love to sit down and discuss your needs. We look forward to hearing from you!