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What type of score for new construction?


kman1011
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A true construction loan only requires a 620 credit score, but the credit history needs to be pretty well clean. By clean, I mean no unpaid collections, judgments or chargeoffs. I always refer to the credit conditions being clean enough to qualify for FHA/VA financing, but with a credit score.

Construction loans repayments are based on stages of completion. There are generally six to seven stages during this process. The only payments that are required are for completed stages. They can also be interest only payments. Depending on the type of construction loan, some may allow for total deferment until the project is completed, with interest accruing until a final loan is in place. This can add several thousand dollars to the cost of the home.

Naturally, the first stage is land acqiuistion and blueprints for the home site Phase two is the preparation of the land (grading of the land so that water flows away from the home for buiding. This could also include the foundation of the home, rough in plumbing, utilities etc. If you already own the land, then this will save alot of your first phase expenses.

Phase three would be the intial framing of the home. Phase four would be the the work that goes on behind the walls. Electrical, plumbing, and heating/air conditioning systems, insulation, etc. Phase five will be the interior completion: Drywall, interior painting, finish electrical, plumbing, etc. Phase six will be the finish carpentry (interior trim, doors, cabinetry, more plumbing connections and electrical) Finally, there is the final phase of finish landscaping.

After each phase an appraiser/inspector must come out and make sure that all is completed for that specific phase before any contractors in that phase are paid.

The first phase is absolutely the most important. When designing your dream home, you will want to make sure that you have everything you want (can afford, that is) included in the initial pricing of the home. Changes in blueprints gets extremely costly, and something as simple as changing a basic bathtub into a garden tub can create delays and cost overruns on the project. In order to make these changes, you may need to completely requalify for the loan for additional expenses (in extreme cases). At the very least, the blueprints will have to be updated and approved, even if you pay for these expenses out of pocket..

One other note, if you are building in a development with a large bulk builder, you may not need to go the construction loan route.

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Are you buying this from a builder, or building it yourself?

If you are buying it from a builder, there is no difference than if you were buying an existing home (with a few technical exceptions that you don't really need to worry about -- the lender will handle those).

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  • 2 weeks later...

Well my parents are contracters so this would be from scratch, no set development. We would have to come from phase 1 on. So do you think a 640- with the only delinquency some late pays and 1 paid collection would have a shot. Do you recommend a regular bank or a mortgage broker>

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