This will be a quick overview of the new construction loan in Tooele County. Actually about a couple of types of loans you may encounter if you are building or buying a new home..
Special Construction Loan
A construction loan is the loan an owner (or builder) gets to fund the construction of a new home. Generally it is short term, 6 to 12 months. Money is released in increments and is paid off when a buyer purchases the house. If you are the builder of your own home you would buy a lot, hire subcontractors to build on your lot according to a plan you have selected. Unless you want to use your own cash, you will secure a construction loan that will pay the subs, buy materials and pay for necessary permits during the build time.
Once you have completed construction and have a certificate of completion, you can put a long term mortgage on the house that will pay off the construction loan. That is called a “take out loan” as it takes out the construction loan
There are a few loan products that combine the short term loan with the take out mortgage so that there is only one closing.
If You Buy From a Builder
If you are buying a home from a builder, you will usually avoid obtaining a special construction loan. The builder does that.
If you are buying a new house that is completed or near completion, you would be buying a “Spec Home”. In that case, the builder financed the construction as was paid moneys for completion as the home was being completed. Money is advanced during phases as the builder draws down the funds allocated for construction. In the industry that is called building on spec, (speculation).
Builders typically cover the construction loan phase so that they will have ready to go inventory for buyers to consider. The lender of the construction loan continues to charge interest on that loan until a buyer buys the home and removes the old loan with a new one (called a take out loan) you will close on a regular mortgage when the building is finished.
List Of Spec Homes In Tooele County
Here is a list of spec homes or houses under construction in various areas of the valley.
- New homes available in Tooele City UT
- Spec homes in Grantsville UT
- New Construction in Stansbury Park UT
- Lake Point Utah new homes for sale
- Erda Utah new construction
Although this makes your financing simpler, there remain a few differences in the mortgage process. The information below on new construction mortgages overview covers this in some detail.Information Requested for New Construction Mortgages
With any kind of mortgage, you must provide financial paperwork and a real estate contract for review. With new homes, you must also include information including the floor plan, building specifications, and any addendums. Because there is no completed structure to view, the building specifications are what lenders will use for underwriting.Appraisals for New Construction. An appraisal is required for all mortgages.
Usually, an independent appraiser will see a property in order to compile a report that determines the true value. Since this may not be performed for new homes, the appraisal is divided into two segments. First, the appraiser will estimate value based on the building plans. Prior to settlement, the appraiser will then visit the completed building to certify that it matches the building plans. Only after this can a mortgage be granted a clear to close.Other Mortgage Requirements Extra criteria apply to new construction in a subdivision. The most significant consideration is the total number of building phases and homes sold. Some mortgage programs require a certain percentage. This is used to ensure that the development is solid and most likely to be finished.
New Construction Mortgages Overview
Upon closing, the mortgage provisions are identical to any other type of home.
Although the initial process is somewhat different than you can expect when buying a previously owned home, avoiding construction mortgages has added value.
For more on new construction mortgages overview or related matters, contact Chris Sloan at Group1 Real Estate. 435-840-5031.
I have the team to find the new construction loan in Tooele County.