Get mortgage financing for your new home
The lender wants to make as much money from your loan as possible. However, they know you will want to compare their loan to another. Therefore, they are going to offer you several selections and then narrow it to one and try to get you to commit right then. If not, they want you to commit to get back with them before making any final decision with another lender. That is the way to leave it. You will check back. After talking to a couple of lenders, you will narrow the type of loan you want. You started out thinking Adjustable Rate Mortgage, and now have decided, for example, a Conventional Loan will be better for you. Consider all the negative press lately from Adjustable Rate Mortgages and Balloon Loans.
After deciding on the type of loan, you are half-way home in the decision making. You can now compare apples to apples. When a lender tries to get you to look at a different program, pull them up short and let them know you are only interested in Conventional Loans (or whichever mortgage program you have decided upon). Get their APR, any points they are charging and any other fees. What else will they require. After the 2008 fiasco, you can be sure you will have to provide payroll and expenses information. Some may require soil tests.
Wherever you decide to get your loan, you will need to provide the lender with plans, specs (specifications) and a budget generated by the plans and specs. To prepare the specs and generate the budget, the builder must be included. You can get pre-qualified for the loan based on the budget generated and the appraised value of your new home. However, you will not get the financing until a contract with a reputable builder is signed. With internet loans and the numerous financial institutions in Georgetown, you would think it would be a easy to compare mortgage offers. Wrong. Hidden costs, excessive points, and underhanded schemes make comparisons difficult.
Be extremely cautious dealing with mortgage brokers. There is a big difference between mortgage lenders and mortgage brokers. Mortgage lenders have money to lend. Mortgage brokers have none. Mortgage brokers make money by "shopping your application". They get a loan based on your credit, not theirs. They then mark it up by adding on points and additional fees. One point equals about 1/8th of 1 percent. One point adds up to a lot of money. This is money you will be agreeing to pay for the life of the loan. Beware of add-on fees such as administrative fees, processing fees, closing review fees, courier fees, document preparation fees, and application fees. Many are not necessary and are simply there to get more of your money.
Many different forms of mortgages are available today. If you are fortuitous enough to qualify for a VA, FHA, or Housing Finance Agency loan, you should definitely opt in for one of them. Nobody can beat the benefits of a FHA, VA, or Housing finance Loan. Should you not qualify for a VA, FHA, or Housing Finance Loan, you will be better served getting a loan from a savings and loan or a true mortgage company. You should be able to beat the rates and fees you would pay a mortgage broker. However, you will have to check around. We recommend you visit the mortgage lender in person. Find out the APR and all fees and any points that will be added. Then you can more nearly compare apples to apples.
Of course, Fanny Mae and Freddie Mac are now whollly owned government entities.
Money talks. Get a pre-approval letter.
Before you can get get a construction loan, you need to show you can convert it to a mortgage loan with a savings and loan, a bank, or a credit union. This gives you credibility and power, but only if you get a letter showing you have been pre-approved. This letter should acknowledge your approval and the amount of the approval. The lender should be forthcoming about providing this. This letter can save you time and hassles throughout the building process.
This is also a good time to bring in your builder. Although Georgetown has many good builders, certainly Dan Amon is the best (yes, we are tooting our own horn). He can help with house plans and designs as well as inspecting any home sites you are considering.
There are so many choices in mortgage loans. As you are reading this, some mortgage lender somewhere is devising another way to structure your loan. The more confusing choices the better to sell you a loan structured to the lenders advantage. Notice I said "sell" you a loan. That is because the mortgage lender you speak with is a salesperson. Do they seem to be on your side and have your interest at heart? That's a salesperson's job.