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CONSTRUCTION LOANS
Construction loans work a little different than a normal loans because there are other costs and parameters to the loan. Below is a description of the differences, associated costs, and related information.
CALL US NOW AT 248-505-6926 TO FIND OUT HOW WE CAN COVER MANY IF NOT ALL OF THESE CONSTRUCTION LOAN COSTS
CONSTRUCTION LOANS DIFFERENCE: In a normal loan, you close once. However, with construction loans, you basically close twice-once at the beginning of construction and once at the end. In addition, there are criteria that must be met after the loan has closed the first time and there are several disbursement periods instead of one right away. There is also an interest rate lock period after the loan is closed that can expire (Example 365 days). This means that if your home is not complete in the 365 day lock period, your rate will be subject to change, or you may be hit with a penalty. Please read on as we discuss some of these differences in the construction loan and the associated costs:
CONSTRUCTION LOANS AND DRAWS: As mentioned, there are several disbursement dates with construction loans. Usually, five times a builder will have to submit a form to get a disbursement. Each time the form is submitted, an appraiser or one of the lender's inspectors, will have to go out to the home and verify that the work has been completed properly. This type of appraisal or inspection takes more time and effort and usually costs about $100 each disbursement inspection.
APPRAISAL FOR CONSTRUCTION LOANS : With the fees for the construction loans inspection, there is also a final appraisal that must be submitted. The normal cost of an appraisal is about $300. However, the cost for appraisals goes up with the dollar value of the home if the value is more than about $350,000. We negotiate with our appraisers to keep your costs as low as possible so there is no exact schedule of costs.
SURVEY FOR CONSTRUCTION LOANS : As with any purchase loan, a survey must be completed. Although usually about $100 for a normal purchase, the cost is between $200-$300 for new construction loans. The survey defines the exact boundaries, dimensions, lot information, legal description, and other valuable information about the property. Any time a property line is changed, a survey must be completed. At the time of the survey, it may be determined that you are in a flood zone. Although this is not really common, if you are in a flood zone you will have to purchase flood insurance. Each situation is different concerning costs.
SETTLEMENT FEES FOR CONSTRUCTION LOANS: One of the differences in construction loans vs a normal purchase is that you will essentially be closing twice. Once at the beginning of construction and once at the end. Therefore there are extra settlement or closing fees associated with a new construction. The normal settlement fees for a purchase are about $400. With a new construction loan, there is usually an additional $200 fee for the second close. Please note that these prices may vary depending on the title company and even the lender.
UP FRONT LENDERS FEES: Underwriting a is very time consuming and tedious work. Therefore, the lender has underwriting fees. In a normal purchase or refinance, the lenders fees vary from $600-$1,000. However since there is more work in a new construction loan, there are more costs. Some lenders will charge an up front percentage on the loan amount. Example, $200,000 x .0075 (.75%) = $1,500 plus an additional fee because in a new construction loan, the loan is basically underwritten twice. Once at the beginning of construction and once at the end. Costs vary from lender so it is best to get an exact quote from us.
OTHER FEES FOR CONSTRUCTION LOANS : With any normal loan, there are other fees to cover. Wire fees for transferring funds about $150, Recording Fees between-$100 and $150, Title Insurance which is directly related to the price of the home (about $1,200 for a $200K loan), Processing Fees of $250 to cover the costs associate with putting the file together, getting it approved, and ready to close, and other minor fees-such as credit report $50 and courier fees of $50. Please keep in mind that these are only general estimates of costs, to get an exact quote, please contact us at: info@mortgages-mi.com or call us now at 248-505-6926.
SPECIAL NOTE: We don't like our customers paying closing costs because they can never get this money back. If the rates should fall and it makes sense to refinance, we feel bad if our customer has a lot of money tied up in there current loan. Therefore, we try the best we can to cover as many of these associated costs as possible. Usually if the amount of the constructoin loans are larger, we can cover most or all of these costs and still provide our customers with the most competitive rate. Call our VIP Divison now at 248-505-6926 to get an exact quote.
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