AL and FL Mortgage News

We love helping people build new construction homes.  Unfortunately, most with a good game-plan never get started on their projects and it isn’t due to lack of financing.  Over the years we have witnessed the breakdown revolves around finding 1) what they are willing and able to build – (i.e. design, size, options), 2) who is the right person to build it, and 3) at what this means for a budget.  So what can you do to prevent this?

Traditional site-built construction (think where the work takes place) is a highly localized process so what one builder is willing and able to do is consistently different from one area to the next.  Also a building site (i.e. your lot/land) is rarely the same as the next person's.  People have different wants and needs so this is a perfect storm of just too many variables.  The good news is there are equal alternatives to site-built construction that can streamline a large this part of the equation.  While we have neglected addressing the topic in prior posts, today's subject is all about modular homes or what some call prefabricated homes.  Note: If you pictured a double wide, stay with me, that isn't the topic. 

After researching and financing these for others over several years I have discovered modular homes are the most underused, underrated, and misunderstood option in the southeast.   This is not true in the western and northeastern US.  The clearest path to understanding why you might consider modular starts with learning the modern capabilities/options they provide and what the product is (or is not).   It would seem there is popular belief that modular forces you to pick only a limited sized home, specific floor plan(s), or a very basic/boring design that looks out of place.  This is actually true for a few manufacturers that I would not recommend using but more capable modern modular home manufacturers offer a host of pre-existing plans of varying sizes from 900 sq ft+, fully customized routes and everything in between.   So if you don’t know your budget, you can start with simple plans based on your family size, basic options and add to your design or one of theirs.  Do you want 9’ or 10’ ceilings on a preexisting plan? No problem.  Do you want tile in all the bathrooms and granite countertops?   Check. 

Regardless of design, size and options a modular product is best understood if you examine the materials and the overall process compared to traditional construction.   Modular manufacturers use the exact same materials as those used in traditional construction and home is affixed to a permanent foundation.  So when the house is completed there is no way to tell it was modular or “stick built” (or sometimes called "site built").  Since this is the largest investment people make in their lives this matters because when an appraiser gives his valuation of the home when new or anytime in the future, modular homes appreciate no differently than traditional construction.  This is true because they differ in where they were built NOT how.  On the financing side Fannie, Freddie Mac, HUD, and the VA all acknowledge modular builds without distinguishing either so you or a future buyer should not be concerned. These are some of the exact reasons I convince people to reconsider not looking to mobile homes as a solution.

Choosing the right contractor will make or break your building experience and I tell people that almost daily  In traditional builds, a contractor or builder manages the project and his subcontractors (framers, roofers, plumbers, electricians, etc) build the house.  With modular the manufacturer designs and builds the home to 80-90% complete in modules (some use panels) in an indoor facility and they ship it to your site where a contractor or builder manages the site preparation, foundation, setting/securing the home to its foundation, completing power, water, and sewer connections and overall finishing of the house.  This process of pre-building the home in modules allows the manufacturer to focus on efficiency and quality control while giving a much more streamlined role to the builder or contractor (yes you still need one).  The best manufacturers know this and have a vested interest in who they allow (or will not allow) to install and finish the home properly.   In traditional construction you choose your builder and vetting them is your responsibility completely.  This is very risky and should not be understated.

In certain areas it is possible to design a modular home and get contractors to give you pricing on the finish work as described above.  You could in essence take those a set of home plans to a traditional builder as well as modular builder and quickly shop the cost and decide what option you think is best for you and your family.  You can use a construction to permanent product to build with modular which includes financing the land if needed.

Have questions about modular homes? 

Want to learn how to qualify for modular new construction?

We’d love to hear about your scenario. 

NMLS # 836498

Posted by Devin Murray on January 6th, 2022 4:09 PM


With lot prices and construction costs steadily on the rise for the new year and beyond, many borrowers are finding it difficult to accomplish a new home build within the new conforming loan limits of $484,350.  For those who already own their land we have seen customers curb this problem by sacrificing finishes in kitchens and bathrooms, reducing square footage, or omitting other extras like pools and/or larger garages.  For those who don’t already own their land and are rolling a land purchase into the transaction, it is common to opt for a smaller or less desirable location as well as making similar cuts to the project just to make the numbers work.

 

There are and will continue to be many benefits you need to explore on the topic of borrowing within conventional loan limits regardless of what your plans are but when building a new home the single biggest challenge of exceeding this limit is when borrowers are forced to (or believe they must) use a construction loan versus a construction to permanent loan.  This can be unfortunate because a regular construction loans can cause the following common problems:

  1. A forced refinance out of your construction loan which requires two sets of closing costs
  2. Being subject to changing rate and economic market conditions until your house is complete 9-12+ months down the road
  3. Being required to put more down on a construction versus a jumbo construction-to-perm loan 
  4. Inability to use lot/land equity toward the required down payment even if you are a seasoned owner

The good news is that as of today you might not have to deal with these headaches, make these sacrifices and/or be subject to these potential risks with the help of our New Jumbo Construction-to-Permanent Loan!

While it is impossible to highlight all the ins and outs our Jumbo One Time Close product here, the good news is if you are building your primary residence you might be eligible to borrow up to $1,000,000 with a 760 credit score with just 15% down or 15% total equity, up to $1,500,000 with a 720 score and 20% down/total equity, and up to $3,000,000 with 30% down/total equity. 

Also new for this specific product is the ability to finance a second home with a construction-to-perm loan.  Under this program a second home requires a 720 score across the board and will allow up to $1,000,000 with 25% down/total equity, up to $1,500,000 with 30% down/total equity, and $2,000,000 with 35% down/total equity, and $2,500,000 with 40% down/total equity.

As with conventional construction-to-perm loans, you can lock in your permanent rate up front and have just one set of closing costs.  Likewise Jumbo Construction-to-Permanent interest rates will vary with the construction time period selected in addition to credit score, loan-to-value and other factors.  However the major Jumbo advantage is that build periods have been expanded to 12, 18, or up to 24 months for projects up to $1,000,000 and beyond so this limits completion date stress significantly.

To see if you qualify, to get more information or to discuss your construction-to-permanent scenario with one of our licensed professionals please feel free to email us 24 hours a day or call 866-269-8335 during our regular business hours.

Product guidelines and terms may be subject to change at any point without notice.

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Posted by Devin Murray on December 11th, 2018 11:55 AM

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