Building a new home - Financing Questions

[Bean]

So the fiancé and I are building a home, we’ve put down our deposit, picked out some upgrades and have put down our 10% to get the ball rolling. (will likely put down 15% at time of possession Sept/Oct 2007)

My problem is the financining, I’ve been browsing through the pages of CP looking at options and tips for getting a mortgage but very few of the threads deal with building a new home. I’ve called around to a few lenders and have found two themes:

Mortgage Broker: We can pre-qualify and guarantee your x% mortgage rate will not change for 90 days if you buy a used home. If you're building, (expected date in Sept/Oct), we cannot guarantee you a rate today, but we'll get the best rate for you 90 days prior to your possession date. [Thus leaving us unsure of how much $$ we'll be paying\

Mortgage Specialist from Bank: (w/ direct partner relationship w/ builder): We can give you y% mortgage rate and we can gurantee it for 11 months while you build your new home! [but what if rate goes down, are we locked in at y% mortgage rate regardless??]


Can anyone out in CP land shed some light or advice for me?

[Julio]

I would go to the bank that you deal with, put the info on the table, and see what they say. If you have been with them for a bit, and have some $ with them, plus a credit card etc, often they will come to the plate for you.

[Madman]

What bank do you deal with?

My wife and I dealt with a great mortgage specialist from TD and I would be more than happy to pass his name along. We are building a new house and he was extremely helpful with getting everything set-up and saving us the most money.

[Bean]

Originally Posted by Madman

What bank do you deal with?

My wife and I dealt with a great mortgage specialist from TD and I would be more than happy to pass his name along. We are building a new house and he was extremely helpful with getting everything set-up and saving us the most money.

The banks that my fiance and I deal with are offering us rates that are slightly higher than others so a loyalty discount may not add up to much. In example, the bank w/ the relationship with the builder is RBC.

I guess I might be jumping the gun a bit here, but does that mean that those who build must go through a bank b/c they can hold a rate for 12 months or so?

I'm a little hesitant with going to a bank as my research is showing that brokers will take care of a few of the fees (appraisal, registration) and that they will be able to perform one credit check instead of one check per bank.

[Ace]

Originally Posted by Bean

The banks that my fiance and I deal with are offering us rates that are slightly higher than others so a loyalty discount may not add up to much. In example, the bank w/ the relationship with the builder is RBC.

I guess I might be jumping the gun a bit here, but does that mean that those who build must go through a bank b/c they can hold a rate for 12 months or so?

I'm a little hesitant with going to a bank as my research is showing that brokers will take care of a few of the fees (appraisal, registration) and that they will be able to perform one credit check instead of one check per bank.

Agree with Fotze, you should hold both rates...

The rate with the builders bank as they will generally hold the rate even if construction takes 15 months. And one with your broaker, I found that they just keep applying for extensions with the lender. In the end you'll have 2 pre qualified mortgages, pick the best one.

[Bean]

So are you saying that it would be better in the long run to take the credit score hit twice?? I don't know how well that would go over...

[Ace]

Originally Posted by Bean

So are you saying that it would be better in the long run to take the credit score hit twice?? I don't know how well that would go over...

Thats up to you to decide, but two credit checks in a year is reasonable. It depends on your level of risk, chances are you'll get a better rate through a broaker so I would suggest only going that route, however since you are concerned about interest rates rising you will have to decide if it is worth the extra credit check to hold the bank rate.

[Gundo]

The Wife and I bought a place in Chestermere last Feb. and we looked at all the options but by far the mortgage broker was the best bet, I have dealt with my bank for over 13 years (im 25) and they wouldnt do anything for us at all.

Here are some factors to think about a broker...
-A mortgage broker serves as a matchmaker between the home buyer and the lender.

-The broker draws from a pool of lenders to find the right match for you, a broker has access to the products of hundreds of lenders, not just one lender's programs.

- A broker knows a lender's specialty. The broker can identify what lender might fit a borrower's special needs, such as the first-time home buyer.

The broker told us out front that we couldnt get a rate locked down until 90 days before we got our place. I but you know the rate we got is better than most the people I know.... we got 5.01% and our broker told us straight up ANY bank or broker should be able to get anyone that rate. Unless their is a huge collapse of the housing market the amount its going to go up or down will end up being a $5 - $20 month difference, and it that will make or break the deal for you then maybe you shouldnt even be thinking about buying a house.

With a bank most of the people we dealt with did nothing but fill our paper work hit a button on our computer and a number came up and that was it, all they do is deal in house and give you their best in house rate. A broker uses all options and works for you to get the best rate. OUr broker is totally free(all of them should be) and we have only had to see her once in person everything else we have done over fax and email, she even took care of the lawyer for us any everything.

You can try use bothing options but I know in the case of our builder the broker beat their banks rates from day one and it has stuck, I have bought 3 houses in the last 6 years and have used a broker everytime and they have yet to give my any sort of problem. I would highly recommend one over a bank any day.

[Madman]

Sounds like a good experience Gundo.

Our mortagage guy was not tied to the builder at all and did not work out of the branch - his entire specialty is mortgages and that's all. We've had 2 previous mortgage dealings in the past and both were handled within our branch by one of the generic branch specialists. They were as Gundo described as someone simply hitting keys and coming up with a number and then having us fill out paperwork. This most recent dealing with a true mortgage specialist was a breath of fresh air and truely how a mortgage should be dealt with.

[MoneyGuy]

Originally Posted by Gundo

The Wife and I bought a place in Chestermere last Feb. and we looked at all the options but by far the mortgage broker was the best bet, I have dealt with my bank for over 13 years (im 25) and they wouldnt do anything for us at all.

Here are some factors to think about a broker...
-A mortgage broker serves as a matchmaker between the home buyer and the lender.

-The broker draws from a pool of lenders to find the right match for you, a broker has access to the products of hundreds of lenders, not just one lender's programs.

- A broker knows a lender's specialty. The broker can identify what lender might fit a borrower's special needs, such as the first-time home buyer.

The broker told us out front that we couldnt get a rate locked down until 90 days before we got our place. I but you know the rate we got is better than most the people I know.... we got 5.01% and our broker told us straight up ANY bank or broker should be able to get anyone that rate. Unless their is a huge collapse of the housing market the amount its going to go up or down will end up being a $5 - $20 month difference, and it that will make or break the deal for you then maybe you shouldnt even be thinking about buying a house.

With a bank most of the people we dealt with did nothing but fill our paper work hit a button on our computer and a number came up and that was it, all they do is deal in house and give you their best in house rate. A broker uses all options and works for you to get the best rate. OUr broker is totally free(all of them should be) and we have only had to see her once in person everything else we have done over fax and email, she even took care of the lawyer for us any everything.

You can try use bothing options but I know in the case of our builder the broker beat their banks rates from day one and it has stuck, I have bought 3 houses in the last 6 years and have used a broker everytime and they have yet to give my any sort of problem. I would highly recommend one over a bank any day.

Ah, someone who understands this. I don't have a mortgage anymore but once I learned the difference, no way in **** I'd go anywhere but a broker, for several reasons.

Also, when they ask about mortgage insurance, tell them no way. Use life insurance. I've sort of become an expert lately in the benefits of life insurnace over more expensive mortgage insurance.

MoneyGuy, CFP

[photon]

The only time I've gone directly to a bank is if I know they can offer me something they can't offer through a broker.

I've got some home equity lines of credit at prime minus 0.5% (full term, not just the first year), and had to go directly to my bank. It was something I haven't seen anywhere else.

[V]

I have a HELOC with a bank, where I pay prime -0.51 for the first year, and just secured a deal through my mortgage broker where they extended the limit on my HELOC, and got the clock to reset so I get another year at prime -0.51. Not as good as photon, but pretty darn good, I think.

[MoneyGuy]

I refer clients to mortgage brokers all the time so they all send me their weekly rate sheet. You can get 4-yr rate of 5.19% and 5-yr at 5.14%. If you want more info, PM as although I check out this site every few days, I don't read too many threads so PM is more likely to be seen.

[flambers]

I built a house a few years back and found the best option was to meet several banks and chat with them. Ask them for different options. Then take it away and go with the one you and your wife are the most comfortable with.

FYI, my biggest problem was not with the mortgage but it was with the builder....... as a word of advice make sure you watch all details very closely. I know a bunch of people that have found lots of problems...

i.e. Window in the wrong spot / Bad paint job / wrong drive way width etc....