Tips And Warnings For Construction Loans For New Home

Believe it or not, it is actually fairly simple to get construction loans for new home today. You can get the loan you need from the top banks around the country straight from a local title company or escrow office. With that said, there are some tips and warnings that can help smooth over the process.

Before getting into what you need to be wary of, let’s dive into some of the important tips to keep in mind. It is absolutely vital you understand that mortgage rates follow bond markets, and this includes construction loans. These types of markets are constantly fluctuating. Because of this, the rate you are quoted at may change rather quickly. Keep this in mind as the lender gives you an estimate.

As a borrower, it is also up to you to realize construction loans for new home are actually becoming rather hard to come by. Thanks to the economy and the overall business climate, expect your credit and equity to be dissected every inch of the way. On top of this, stated income loans have also depleted and are no longer available by any lender thanks to the stricter lending guidelines now intact.

The final tip you want to keep in mind is to check with your lender about any requirements there may be for lien waivers. A lot of lenders are going to require one for each draw there is on the account. When using a builder, lien waivers may even be used for subs. If this is the case, you need to know how payments to subs are handled so that all waivers are returned efficiently.

One of the top things to be wary of is an old trick in the books known as the “bait and switch.” Mortgage lenders are known for this technique which involves a loan officer offering you one thing and then trying to sell you on something else.

This is where common sense comes into play. If something sounds too good to be true and looks too good to be true, typically it is too good to be true. For this reason, your safest bet is to get your quote in writing. If the rate appears to be what you are looking for, lock it in upfront to avoid having the quote jump on you in the coming days.

Some of the most common forms of bait and switch include being offered a lower rate over the phone than anything else you have seen since sending in the application or being offered the loan with no points and no loan fees.

The key is understanding the basics and being patient with construction loans for new home. It can be a terrific option for some, but the last thing you want is to get taken advantage of without realizing it.