Buying New Construction: The Comprehensive Home Finance Guide

As a seasoned loan officer since 2002, I've supported numerous clients with home purchases, refinancing, debt consolidations, home equity, line of credit, and all things mortgage-related. However, one topic that always generates intrigue is new construction home financing, which often leads to misconceptions.

New construction, contrary to popular belief, doesn't imply a construction loan. When you engage with a home builder, you're entering into a purchase agreement. The key difference with new construction is that the home isn't ready when you sign the contract. Every builder operates on their own schedule, and let me clarify from a financing standpoint that builders can rarely guarantee a closing date.

Understanding the process is crucial. The construction timeline is influenced by various factors such as worker availability, material procurement, permits, and inspections, all of which can extend your wait. It's essential to maintain the same financial stability as when you were pre-approved – this includes credit score, income, and cash flow. Any changes during the construction period may influence your loan application's outcome.

One aspect often overlooked during new construction purchases is the ambiguity surrounding real estate taxes. When buying a newly constructed home, the real estate tax estimate is usually high, based on a projection provided by the township. The actual assessment may be lower and might take place anywhere between three months to a year after your purchase. Hence, real estate taxes and fluctuating interest rates add to the list of variables that need consideration.

At the Lending Group, we follow a practice that minimizes the impact of interest rate variability. Our strategy generally includes a 90-day rate lock with an option for a free float down for new construction customers. This means, if the market rate drops significantly during the locked period, we adjust your rate accordingly. While we can extend the lock period, be aware it could entail additional costs. Our philosophy is to prevent charging our clients upfront fees to lock deals whenever possible.

But don't let these details overwhelm you. In essence, a new construction loan isn't too different from a regular mortgage. It requires a bit more patience and understanding of the factors at play, which can help avoid confusion and ensure a smooth home buying experience.

Remember, the journey to your new home shouldn't be fraught with worry and stress. I'm here to assist, so feel free to reach out with any questions or concerns. Whether you're dealing with the Lending Group or another agency, don't hesitate to ask your loan officer about the process. For those contemplating new construction, you can also apply directly through ApplyWithLeon.com.

In conclusion, I urge you all to familiarize yourself with the new construction loan process and its nuances. Doing so will put you in the best position to move smoothly into your dream home. Here's to you finding your perfect home, and remember, we at the Lending Group are always ready to help.

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