How to Finance Your New Home

Mark Robinson: Hi, and welcome back to the Envision. Home At Last. The other day I had a discussion with Tim Mueller, whose part of our business development team here at Blenker and discussed financing. So, I wanna share that information with you. In the end, if you have any additional questions or concerns, visit us on our website,
Mark Robinson: We’re here today with Tim Mueller, he’s part of our outside sales staff at Blenker but has a really good background in finance. Tim, can you help us out with this?
Tim Mueller: Sure. What’ve we got?
Mark Robinson: Today, I want to talk to you about what customers can expect for both the pre-approval process and for the construction loan. So, let’s start with pre-approval. What can customers do to prepare for that?
Tim Mueller: Initially, what they need to do is to do their…they got some homework to do. So, they need to get a credit bureau of their own. They can go onto, annual credit report, they’re allowed to get one a year. Go and make sure there’s nothing on the credit bureau that doesn’t belong to you that could be bringing your score down. Make sure the information is correct. In fifteen years in lending, I’ve seen a lot of things on credit bureaus. So they should make sure that all that information is correct. Don’t go around apply at every bank and have a bunch of people pull a bunch of credit bureaus on you. ‘Cause that could effect your score and bring it down. The score is a major factor in getting the pre-approval. Lastly, gather up all the documentation that your bank is going to need. Such as? Well, you’ve got 12 month bank statements. You could have two years of income taxes. Other assets. All the information that would show that you’re a better credit risk to the bank. It would make the approval easier. It would get a lot of headaches up front ahead of time and then just be realistic. They should be realistic about their budget and where they want their payments to be. They should really know, you know, where they are comfortable. When you have the mortgage for the next thirty years, you want to make sure that you’re comfortable with that payment and the price range that you’re in for the house that you want to build.
Mark Robinson: OK, and the advantage of that now is, the homeowner can take that number to their builder, and design a house that meets their needs within that budget.
Tim Mueller: Right, right.
Mark Robinson: OK, now let’s assume that gets done. Now, I assume you’re back at the bank with all that information. What happens next?
Tim Mueller: Well, they would order an appraisal…from an appraiser. A local appraiser that knows that market. Usually takes two to four weeks depending on everything else they’ve got going on. They set up the construction loan. They will open an escrow account, add a title company, and they manage the funds. So, they manage the draw schedule. And the draw is…through each stage of the construction process the title company would issue money out to the builder as they complete each stage and then the buyer would usually make an interest only payment based on the balance that carried at that time. And hopefully, they can get into a situation where…and I think a real common product out there right now is a construction to perm…permanent loan. So, you need to roll that over from a build construction loan, you know, from where’s interest only payments to something that’s a permanent, conventional mortgage. So, usually 15, 30 years are two common terms for those, and, to be…that’s the end loan to be set up on, on that conventional mortgage: everything’s done.
Mark Robinson: OK, so that pretty much covers the finance process… They’re done. From start to finish with construction. Correct?
Tim Mueller: Yep.
Mark Robinson: Great. Thanks Tim, that’s what we needed.
Tim Mueller: You’re welcome. Well, there you have it. There’s some information regarding financing when considering your new home construction. I hope you find this information helpful. If you have any additional questions or concerns, visit us on our website.

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