Pre-built homes have several advantages that you should be aware of. For example, they can provide you with a first-mover advantage. They also typically provide investors with a great return on their investment and may also allow the buyer to get a custom build.
It should also be noted that payments tend to be spread out when dealing with a pre-build. It may be possible to spread out a deposit structure over 2 to 4 years in some cases.
However, you will require a mortgage pre-approval that adheres to all the developer’s terms and conditions. Here, our focus will be on how you can get a mortgage on a pre-build.
Your developer will require mortgage pre-approval before decorating your home. It should also be noted that most resale mortgage pre-approvals will only be valid for three months. Having mortgage approval is imperative for those looking to join the pre-construction industry.
Working with a licensed mortgage broker is the most effective way to get a mortgage. Once the final closing of the unit has been achieved, your mortgage loan will commence. In other words, the final closing begins when your developer has completed the building.
Once the actual title is moved to your name, the full amount for your completed home will be due. A mortgage will need to be secured and lined up with the date.
With pre-build homes, the down payment system is broken into a layered deposit system. For example, you may need to provide $6,000 with the offer and then pay down a balance of 5% within a month. The total down payment amount may range from 5% to 20%.
Having a good credit score, stable employment, and a letter of intent are just some of the key factors that may help you qualify for a pre-construction unit.
You will need to get a mortgage pre-approval to demonstrate that you will not default once the developer completes the building. Most developers will require a mortgage pre-approval within thirty to ninety days from the day of the purchase.
After the said period has elapsed, you will need to renegotiate the terms and conditions of the mortgage. A common down payment amount is 20% in the real estate market.
As for a typical structure, you may be asked to deposit $5,000 with the offer. A balance of 5% may be due within the next month. The next 5% may be due in 3 months, and another 5% in 6 months.
Then, you will need to put down the final 5% on the actual day of occupancy to finalize the deal. The remaining amount of the loan will be paid the same way you would pay for a resale home; via monthly mortgage payments with interest attached.
The down payment amount can range from 5% to 20%, so you need to perform the necessary due diligence and compare and contrast lenders and developers to find the best offer. Getting a lower mortgage rate may be possible by partnering with a reputable mortgage broker.
The most effective and arguably easiest way to obtain a mortgage is via a mortgage broker with a proven track record of success. They have access to a wide range of lenders and resources that other parties do not.
You can also try credit unions or banks if you would prefer. It should also be noted brokers do not usually charge anything for their services. They will also help you gather the necessary documents to qualify for your mortgage pre-approval.
Some of the key areas that lenders focus on when determining who qualifies for a mortgage include employment history, credit score, and debt to income ratio.
Buying a pre-construction home will allow you to buy a home at a low price while the area is still new and in development. Then, as more investors invest and the neighbourhood grows, its real estate value will skyrocket.
You can then flip the home for a large profit to maximize your return on investment. Moreover, you may be able to choose the architecture and layout of the building or unit and the finishings, allowing you to enjoy a home that speaks to your unique needs and preferences from watching movies to relaxing on the couch.
Buying a pre-build home may be your only viable option if you cannot afford an existing property. A mortgage may be required to purchase a home, and working with the right lender will allow you to negotiate terms that both parties can agree to.
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