What to consider when purchasing a New Construction Home
When you are purchasing from a builder, there are a few questions to ask about financing:
How long before your new home will be ready? (this is important and may affect your rate hold options)
What type of mortgage is required?
A COMPLETION mortgage (your mortgage starts the day you take possession)
CONSTRUCTION DRAW mortgage (your builder wants the financing in place immediately, and then will draw funds at different stages or draws during construction). Typically draws are taken at:
- Lock up (framing is complete, windows and doors are on)
- Finishing or drywall stage (electrical and plumbing rough ins are complete, drywall is up)
- Completion (home is complete and ready for new occupants)
- Some lenders allow for additional draws at different stages, this is something I can work with your builder on if it is required.
On CONSTRUCTION DRAW mortgage, will the builder pay the associated costs and interest on the draw financing or will that be your responsibility?
Does the builder require that you use one of their "preferred" banks for financing? This may limit your financing options.
What type of deposit is required and when? Most builders request an initial deposit (approximately $1000) when you write up your purchase contract, and then require a minimum amount (for example 5% of the purchase price) as an additional deposit when your financing is approved. Some builders will allow you to pay additional deposits during the construction period.
Most builders will be flexible on where you get your mortgage as they want to sell their homes, so it is important to get as much information up front to discuss with your mortgage agent.
As always I am here to help you with any questions you may have.