Need some mortgage help

[ChevyHDGert]

We're in the process of talking to banks about getting pre-approved for a construction loan to build our house and then roll it into a 30-year fixed mortgage.

This one guy told me that I will have 2 sets of closing costs. Won't I just have one, at the very end?

We have lots of equity on our house in town that we plan on selling sometime during construction and our land will be paid off by the time construction ends. The equity from our house sale will be our big down payment on the new mortgage.

Plus he told me that escrow is now mandatory thanks to some new federal law, that true?

This is all very confusing to me, anyone have any tips or advice?

 

[oldnslo]

Plus he told me that escrow is now mandatory thanks to some new federal law, that true?

This is all very confusing to me, anyone have any tips or advice?

I did not have to include escrow in my mortgage as of 10/09. may be some thing new for 2010..

Roy

 

[bp fick]

If THAT particular bank works things that way, then chances are, that is the way it will be. Different banks have different ways of doing things, such as converting a construction loan, (note: loan) into a conventional mortgage. Loans and mortgages can be two different things. Some banks do something else and how someone else does it is meaningless.

I'd would be more concerned with rates, bank relationship, clarity, fairness, promptness and of course, costs.
Stay focused on those things. Shop more than one bank, unless you have some extraordinary loyalty to the one you are working with now. And... happy house building!!!

 

[RTII]

We're in the process of talking to banks about getting pre-approved for a construction loan to build our house and then roll it into a 30-year fixed mortgage.

This one guy told me that I will have 2 sets of closing costs. Won't I just have one, at the very end?

We have lots of equity on our house in town that we plan on selling sometime during construction and our land will be paid off by the time construction ends. The equity from our house sale will be our big down payment on the new mortgage.

Plus he told me that escrow is now mandatory thanks to some new federal law, that true?

This is all very confusing to me, anyone have any tips or advice?

I was in the same situation last year. Could not find a loan institute that would just roll it over without new closing costs. In the end I went with 2 different banks, shopping for the best rate as well as the least closing costs. The bank that had given me the construction loan would have been $2,000 more in closing costs on the mortgage loan. I gave them the option of matching the rate given and they declined so i went with the lender that I have now. My opinion is it wasn't a very smart move by them (initial loss of 2K against the interest earned over 20 years). It's all bussineess.

 

[MossRoad]

We're in the process of talking to banks about getting pre-approved for a construction loan to build our house and then roll it into a 30-year fixed mortgage.

This one guy told me that I will have 2 sets of closing costs. Won't I just have one, at the very end?

We have lots of equity on our house in town that we plan on selling sometime during construction and our land will be paid off by the time construction ends. The equity from our house sale will be our big down payment on the new mortgage.

Plus he told me that escrow is now mandatory thanks to some new federal law, that true?

This is all very confusing to me, anyone have any tips or advice?

I hope you can survive payments if your town house does not sell. That is about the only thing that is keeping us from building right now. No houses are selling for what they are appraised at and we don't want to keep all that money tied up in the equity of our unsold house.

 

[mjarrels]

I did'nt have any closing cost on my construction loan... but that was 12 years ago.

mark

 

[ham]

Slow down. Take your time. Remove emotion. Building your house needs to be done with a clear mind without time pressures. Do everything you can not to have a time frame on the construction loan. In other words lots of these have a 6 month building period to them which to me is not feasible and allows contractors and subcontractors to take advantage of your time constraint. This should be one of the most enjoyable times of your life...I know the building and occupying of our dream house has been the most enjoyable time of my life (other than my marriage and the birth of our children. So take your time. Don't over extend. Do it in steps. Be a new smart American...and set a fresh example.

 

[Mike Costello]

Look at it as a 2 step process. Step 1: Construction loan is a temporary loan with a time limit that allows you to build your home. Since there is more risk involved, interest paid will be higher and typical escrow fees such as processing fees etc. will apply. The key here is to get your home built within the specified time limit of the construction loan. Step 2: Mortgage loan that will pay off your home in the number of years specified. This is where you can do the shopping for the best deal. Typical closing costs will apply here. Some banks will do both types of loans, so converting to a mortgage can be seamless.
When I built my home, the construction loan and the mortgage loan came from 2 differnt lenders. The construction loan gave me 18 months to finish my home (log home) and I did it in 11 months. The mortgage loan came toward the end of construction and envolved typical closing costs. As soon as construction was completed, the mortgage loan paid off the costs of building and began the 30 year payoff process we are all familiar with. I had no problems with the whole process, but I kept a heads up attitude on everything from construction to financing. I acted as my own general contractor and if your good at organization and people management new home construction can be very rewarding. I had alot of fun building my log home. Mike.

 

[2manyrocks]

.

This one guy told me that I will have 2 sets of closing costs. Won't I just have one, at the very end?

A few lenders had a loan product that was a construction loan that then converted into a mortgage with one set of closing costs, but with all loans, you have to compare the total costs of each deal to decide what's the most cost effective.

Ordinarily, closing costs should be paid out of your pocket and not rolled into the loan.

Don't know if escrow is now mandatory because of federal law. Escrow is to protect the lender against your failure to pay your property taxes or insurance. It's not for your protection or convenience. In the past, the decision whether to require an escrow was up to the lender, and I have doubts whether it is now required by law--could be, but I'd have to verify it.

Maybe the market is good where you are, but even in good times, my realtor always said to sell what you have first so you really know what equity you're getting out of your existing home because committing to another one.

Before going into debt for 30 years, I'd suggest you look into Dave Ramsey's Financial Peace seminar at a local church to look at living debt free.

 

[jwstewar]

When did our construction loan almost 3 years ago now, we talked to banks that did it both ways with the Construction loans. Some wouldn't roll the construction loan over, others would. Finally we talked to Huntington National Bank. They would roll it over, had competive closing costs, some of the best interest rates, and we had approval while we were sitting in the office and closed 10 days later. Seemed like the best deal for us all the way around. We've since refinanced the loan again with Huntington and gotten an ever better 30 year fixed rate.

The bank did require us to do the escrow, but not sure if it is bank or fed that required that.