New Construction FAQ's
Frequently Asked Questions: Modular home financing and construction / mortgage lending.
• Will New Century Bank provide construction loans for site built homes?
• What is the difference between manufactured and modular homes?
• How does the construction process work?
• Do I get the same interest rate for modular home vs. other building methods?
• Can I use my VA eligibility to build a home?
• How long does the process take?
• Does my land count as equity?
• What is the minimum down payment?
• Do I need to own land prior to obtaining a construction loan?
• What will my payments be during construction?
• Do I need to sell my home first before I build new home?
• When can I lock my interest rate for the permanent mortgage?
• What is the minimum credit score required?
• How do I get a permanent fixed rate mortgage after construction?
• How do contractors get paid?
Interest rates, terms and appraisals for modular / system built homes is exactly the same as a site built homes. Manufactured homes or mobile homes require only mobile home comparable sales for appraisals and the interest rates are higher. Click this link for greater detail of the definition.
Please look at our power point on the lending process or our brochure for more information regarding the process. A shortened answer is: 1. Pre-qualification for mortgage, 2. Document the application, 3. Select a piece of property 4. Select a home and obtain written bids from contractors, 5. Appraisal on the home and land as if completed, 5. Loan Commitment obtained through FNMA underwriters. 6. Open a construction loan with New Century Bank, 7. Build the home, 8. Final inspection, 9. Close permanent mortgage loan that pays off construction loan, 10. Live happily ever-after!
YES. Modular homes are regular homes and Fannie Mae offers the same interest rates.
YES, but the government makes is really difficult for the Veteran to build using their VA eligibility. Click on this link for explanation of how the VA and Conventional and FHA loan compare to one another in the new construction arena.
pre-qualification can take place with a simple two page application within 24 hours from the time we receive it. The rest of the time-line depends on how long it takes for the documentation to arrive at the bank including the contractor bids. Appraisal times range from 1 to 3 weeks, underwriting a few days and closing 3 days.
YES, Land is considered the same as cash. The appraisal of the “as-completed” project will determine the amount that land counts toward the total appraised value which determines down payment equity.
Only enough equity to meet the FNMA (fannie mae) requirement plus the closing costs. Conventional loans require a down payment of 5% + closing costs come in the form of cash or land equity or a combination of the two. Each application is subject to lender review to determine the minimum down payment.
No. The first draw on the construction loan will allow you to purchase the land.
The construction loan charges interest only on those dollars borrowed for the days borrowed. The loan will bill the client one week prior to the due date with the amount due. Each month as the loan principal grows, the interest payment also grows. Loan Estimates provided by the bank will give you average and high monthly payment estimates prior to closing your loan.
You may be able to build, first, then sell your home and move one time. This question needs to be further examined by the bank and is somewhat dependent upon the client financial information. New Century Bank construction loans are often able to serve as a bridge loan, meaning a client may be eligible to stay in their existing home while the new home is being built.
The interest rate can be locked for the permanent mortgage after the home is complete, all the construction invoices are paid, a certificate of occupancy is issued and the appraiser has completed the final inspection. Interest Rates can be locked for 30 days without additional expense to the client. Longer rate locks are available at a cost. It is always better to wait and save the expense.
If your desire is to have a permanent mortgage fixed rate through FNMA, then your credit score needs to meet the FNMA requirement. Each client’s credit profile is different and there are many determining factors, however, FNMA will require a credit scores in the mid 600’s. You should check with New Century for programs that are available for lower scores such as the “Buy or Build while credit is rehabilitating” program. A program unique to New Century Bank where scores can be lower than the mid 600’s.
The mortgage commitment with New Century Bank is for both the construction loan and permanent mortgage. Only one application is needed. When the new home is finished, the permanent mortgage will seamlessly payoff the construction loan.
New Century Bank receives invoices from our client with authorization from the client to pay the invoice. New Century will record payment on an accounting summary and pay the contractor direct within a few days. Though there are no specific limits on the number of draws, we ask that common sense be applied to reduce workload.