Financing Your New Dream Home

We’ve all dreamed of building a home—well, having someone else build it for most of us, that is!—and currently in Lincoln there are really great options available in newly developing neighborhoods all across town.  Building a home is a chance to customize everything, from the floor plan that suits you best to the materials and color palettes you prefer all the way down to where the outlets are placed in the bathroom (it’s important!) and the accent hardware.  Choosing the right professionals will ensure that at the end of the journey, you are living in the new home of your dreams!

When planning to build a home, you’ll also be working closely with an experienced financial professional who will lead you through the financing process each step of the way.

“The process of obtaining financing to build a new home is not much different than the process of obtaining financing for an existing home,” explains Matt Gutschenritter, Assistant Vice President of Mortgage Lending at Cornhusker Bank.  “Basically, at the end of the construction, all parties involved including the borrower, the builder, the realtors, the bank, etc. will want to have the peace of mind that new owners have their long term financing in place and ready to go.  The process starts with getting pre-approved for long term financing.  Once we have that in place, it’s a matter of having the discussion with the builder to determine who will be taking out the financing for the new construction, and putting together a contract.  If the builder takes out the construction loan, then we work with the buyer in getting them approved for a purchase transaction once the house is completed.  If the buyer/borrower takes out the construction loan, we work with them during the construction process, and get them prepared to have their long term financing set up as soon as their house is built.  Upon completion of the construction, we would set up their long term financing and payoff their construction loan.

At the start of the process when we are getting the client pre-qualified for their financing, we look at credit, down payment, monthly obligations, income, etc.  This will allow us to determine not only if we can get the client approved for financing, but even more importantly, to make sure that the client is comfortable with their new house payment obligation.  This is essential since this monthly payment will likely be around for about the next 15 to 30 years.

Furthermore, mortgage rates continue to be at or near record lows.  It seems most of the talk around the industry is that the Federal Prime Interest rate may soon be increasing.  While not directly linked to long term mortgage type rates, this will usually coincide with mortgage rates increasing at some point in the near future.  As far as resources go, usually we take out an interest rate ‘lock’ around 60 days prior to the completion of a newly constructed home.  However, with the threat of rates going higher in the near future, if someone is losing sleep over these interest rates, at Cornhusker Bank we offer a six month ‘lock’ program to help eliminate this issue.

There are benefits to both building a new home as well as buying an established one.  The most obvious advantage to building is that you are assured to get the features, and floor plan that you want.  However, when it comes to building, you may not be able to build in a neighborhood that is close to the area of town that you want to be in based on location near schools, work, shopping, friends and family, etc.  As far as costs go, it can be more expensive to build than to buy, but not always.  The initial costs to get into a new construction may be higher, but chances are there should be minimal expenses when it comes to repairs, decorating, and general upkeep.  With an existing home there will likely be the need for replacing the roof, windows, utilities, etc.   With a newly built home, everything is built to current code, and therefore should be less expensive to heat and cool.  Most people do not realize that Homeowners Insurance is typically less expensive on a newly built home as well.

At Cornhusker Bank, not only do we provide financing for the construction project – whether it be the builder or the borrower taking out the construction loan – but in most cases (depending on the type of financing the borrower goes with) we continue serving the client by keeping the servicing of their new loan here at Cornhusker Bank.  Located right here in Lincoln, we are staffed to service our mortgage loans into the indefinite future rather than selling this servicing off immediately after closing on the loan.   This also means that we go the extra step to ensure a smooth transaction, because we know chances are we’ll be working with these same clients far into the future.

We have a lot of useful information on our web site, www.cornhuskerbank.com, where, amongst other features, a customer can complete a mortgage loan application or pre-qualification on line.  The application has worked well for many customers and their busy schedules.  It is streamlined and therefore eliminates a lot of the questions, based on the answers given, that the regular paper application presents.

Although construction loan rates will vary from one lender to another, usually the difference is minimal.  Always keep in mind that the typical construction loan process is approximately six months long and during this period the customer only pays interest on the balance that has been drawn upon.   Do not get overburdened with the construction loan itself–the bigger financial impact will come with the long term financing.  Look for a lender that has your best interests at hand for the long term.”

From Strictly Business Magazine, May 2015

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