New Construction Lending

[real estate wrangler]

If you have questions about new construction lending this a good place to start.

New construction lending standards change day to day now, you will get the latest updates here on may of the following topics....

Pre sale requirements
Portfolio lenders vs Fannie and Freddie lenders
Lending standard updates
Mortgage types for new construction- arms, hybrids, non conforming, etc
Interset rate locks
FHA approvals
and so on....

Don't be afraid to ask questions, post concerns, etc. There is no such thing as a dumb question when it comes to your money!

[Gena]

You have options if you are looking for new construction financing, in other words you are buying a home in building that it under construction.

The big banks typically have pre sale requirements of around 70% nowadays. This percentage fluctuates based off of Geo specific guidelines, different places have different pre sales requirements, but the rules change day to day.

The big banks have to go through fannie and freddie, and in fact it is these institutions that require the pre sale requirements.

This pre sale requirement means that 70%(used as an example) of the homes located within the building you want to buy have to be sold for you gain financing through that bank.

There is a lot more, but I am no pro.

[Michael]

You have options if you are looking for new construction financing, in other words you are buying a home in building that it under construction.

The big banks typically have pre sale requirements of around 70% nowadays. This percentage fluctuates based off of Geo specific guidelines, different places have different pre sales requirements, but the rules change day to day.

The big banks have to go through fannie and freddie, and in fact it is these institutions that require the pre sale requirements.

This pre sale requirement means that 70%(used as an example) of the homes located within the building you want to buy have to be sold for you gain financing through that bank.

There is a lot more, but I am no pro.

I know your not a pro, but does that mean you just can't get a loan in a building until it meets it's pre sale requirement?

[Casa]

I know your not a pro, but does that mean you just can't get a loan in a building until it meets it's pre sale requirement?

No, just because a building doesn't meet the Fannie or Freddie pre sale requirements doesn't mean that you won't be able to get financing for new a construction home that doesn’t meet their pre sale requirements.

If you are interested in or have purchased in a new construction community and this community has yet to fulfill pre sale requirements you need to explore “portfolio lenders”.

Portfolio lenders are banks that hold their own assets let’s say rather than sell or trade them on the market. That means they don't have to meet presale requirements that are established by Fannie and Freddie. Big banks often have what they call "outlets" which are portfolio lenders, so I would also check with bigger banks. I would shop at least 3 or 4 lenders from both big banks and portfolio lenders.

[Michael]

It's still a little scary out there. Things are def looking up, but the job situation is still a concern.

I think a lot of people are going to look back and kick themselves for not buying, if they were in a position to buy.

It's all cyclical and this cycle is slowing and changing, it won't be abrupt, but change is coming.

[kavi]

This rise in popularity has given builders a large amount of financial clout and a more complicated financial situation to boot as many are now publicly traded companies with shareholders, public perception and employees to keep happy all at the same time. To fatten the bottom line, which usually solves all three of those problems, many have turned to partnering with lenders they are either closely allied with or own outright.

Simply put, selling homes is just one part of the business model of today’s builder and while part may be dedicated to building commercial infrastructure into communities to reap greater profits, part is certainly dedicated to getting increasingly involved in the loan you take out on their new home.


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