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


While no residential construction-to-permanent scenario is ever the same, we have consumers contacting us many months deep into the process of getting construction-to-permanent financing with a great deal of effort and money involved often with little to no results.  There will always be aspects of the process that will be out of your control but below is our 2017 Top 10 Tips you can use to better understand the overall process and help make your construction-to-permanent financing for your project as smooth as possible.  The list is chronological so not moving forward until you revisit and are done with the previous steps is your key to success no matter who you use.

  1. Get a preapproval for your loan As we have mentioned in previous posts putting 10-20% down for a construction loan plus closing costs and more is a popular myth that banks and credit unions regularly sell today.  This is simply not a fact if you live in Florida or Alabama. We offer VA construction to permanent loans with 100% financing and FHA loans with 3.5% down required.  Get qualified in minutes, get a quote on rates and costs, and find more about available construction-to-permanent programs and requirements by request a pre-approval.

     

  2. Search for a builder – Builders are regional in nature so ask people in your area for referrals to local builders.  Read online reviews and do some homework.  In metropolitan areas, check with the BBB or Chamber of Commerce.  Narrow your search to no more than 2-3 builders you think you want to use.  Avoid contacting them until you have a strong idea of what you want to build because time is money and you will spend a lot of both trying to make these basic decisions that you can make without a builder's input. When you do reach out, be direct.  Ask how busy they are when you talk to them.  A builder who is overloaded is commonplace today.  To be of some additional help to you in your search, we have a contact list of regional contractors we have direct experience but no direct affiliation with.  

     

  3. Decide what you want to build – just as if you were buying an existing home, know the bedroom and bathroom count you want.  If you can’t answer this question, you aren’t ready to move forward.  Use the internet as one resource in your search.  There are scores of entire websites with online house plans to browse.  Drive around and see what is being built in your area.  Cost is largely a function of size and customization.  Narrow down a square footage range keeping in mind a range of $80-$100/square foot for non-custom work, $100-$130/square foot for semi-custom work, and $131-$200+/square foot for fully custom work.  Know what style exterior and interior you are looking for and note that entire cities and/or developments have restrictions on size, design, and structural requirements (i.e. 1800-2100 square foot minimums).  For fully custom work, you need to start the process of having your plans drawn up first as custom home designs can take 2-4 months all by themselves.  For all other projects, contact your builders to see what existing plans they have on file that have already recently built.  You can save thousands of dollars and months of wait time if you can use a plan that already exists that you want to maybe modify in only minor ways.  If your builder has already built a home very similar, you will probably save time, money, and headache when compared to him/her starting entirely from scratch.  Be realistic toward your total preapproval amount.   Know where and in what part of the home you want your budget to be spent.       

     

  4. Get builder quotes – Only after you know what you want to build and have supplied a basic floor plan and design (or used one of their own), ask your builders to quote your project.  The cheapest quote does not always translate to the best results.  Do not put a deposit down with anyone until you are ready to 1) choose your builder and 2) have a site on which to build the project.  After seeing the quotes, you may have to go back and make more changes to what you want to build.

     

     

  5. Shop for land – Assuming availability is plentiful, getting a piece of land under contract can happen in 24-48 hours.  In areas were vacant land is not abundant you need to budget more time for this search.  Choose a site that is appropriate for what you want to build.  Don’t build a castle among cottages that won’t appraise and that you can never sell.  The golden rule is don't put your land under contract until your plans are done and you are ready to decide who your builder will be.  If for whatever reason you plan to delay your building plans for whatever reason and want to purchase a lot we do offer loans on vacant lots and land, including acreage. 

    1. Buying land for construction - If you want to buy a lot/land and want to wrap the construction to permanent financing all into a single closing, do not put the land under contract until you have a set of plans to be completed, confirmed what builder you will use, and are 100% sure of the cost to build including site preparation, septic/well costs, and the cost to run power to the house.  Do not sign the land contract for less than 60 days.  You will need to shop for a survey after you get the land under contract.

    2. Existing owner of land - If you already own land or have an existing parcel that will not be modified prior to construction you will need to supply the existing recorded deed, a mortgage statement if you owe money on the land, and work toward getting a survey.  Surveys that are older than 10 years old typically need to be recertified if the original surveyor is still open for business.  If a parcel will be changed a new survey (which will ultimately determine a new legal description) and a new deed (with a new legal description) will need to be drawn as soon as possible.  Modifying a parcel and completing this can take weeks because the deed has to be recorded with your local probate office.

    3. Gift of land – Having land gifted to you from a close relative or family member is acceptable and the process is no different from above regarding an existing owner of land.  However if the family member is deeding you a portion of land from a larger existing parcel, having a survey and new deed signed needs to be handled as quickly as possible.  The process is just like the scenario above with a modified parcel however since additional parties are involved (donor) it always takes more time in practice.

  6. Confirm who your builder will be – once you are ready to put your land under contractor (or deed for existing owners or gift situations), you have a price to build your home on that land, and your plans completed as you want to build you need to choose your contractor before putting the land under contract.  Ask and follow-up with their references, inspect their work, and make sure they are easy to deal with in the beginning.  Please know that a contractor who refuses to provide information to your lender is an automatic red flag for us and it should be for you.  The same thing applies to builders who are slow to provide documentation.  All lenders have some form of contractor approval process so he/she will need to be willing to complete this process, in addition to completing a cost breakdown and various other disclosures. 

     

  7. Put the land under contract - With all else considered put the land under contract with a minimum of 45 days as a closing date with 60 days as the ideal time from moving forward.  Line up a surveyor, get survey quotes, and be ready to place your order for a land survey within 1 week, typically after loan approval.  If your building site is bigger than a few acres, expect the cost of the survey to increase significantly.

     

  8. Sign Loan Application – In today’s lender environment of strict compliance no lender can proceed on your loan without a concrete figure from your builder because accuracy is key and re-disclosing a loan several times for small changes eats up significant time.  So with your builder picked and your site under contract (or existing land deed ready) a project calculation sheet will be provided within 24-48 hours after you give your lender the cost to build.  You will use this document to sign and complete a contract with your builder to include construction interest and soft costs.   Your builder contract and calculation sheet will be the basis of your full loan application and disclosures.  Your builder may want a deposit on the project which is fine but do not sign his/her contract until a project calculation sheet can be drawn.  Your appraisal can’t be ordered until the plans and specs are completed turned in.  At this stage you are approximately 45-50 days away from closing. 

     

  9. Loan approval/final conditions – with your contract to build and loan application signed you will turn in a list of required documents just as you would for any mortgage loan.  Loan approval typically takes 2-3 days on average.  Despite contrary information, getting approved for a construction to permanent loan is almost identical to any conventional, FHA, or VA loan.  The average consumer is not aware and typically avoids the many potential equity benefits of these products as a result. 

     

  10. 3 Pieces to Get to Closing – from processing to closing, your constriction to permanent loan has 3 main parts.  Credit approval is just like any other loan.  Your builder will need to supply a small amount of information for builder approval which takes just a few days to clear up after his information is turned in.  The third and final piece to your loan is project approval.  At application you will sign several disclosures, some which will also be signed by your builder thereafter, stating who is responsible for what and that is the limitation of your involvement on the project side. Your builder will complete and turn in most of the items specifics of the project such as a specification of materials, cost breakdown, and other items.  The key to finishing the 3 parts is to focus on getting all the items for credit approval and making sure the builder is turning in the items for builder and project approval.  Once these 3 parts are complete, your closing can be scheduled.

     

Closing a construction to permanent loan is no different than any other loan with the exception that your builder or authorized representative must be present to sign a few documents.  The only major difference in time is that a closing package typically takes 2-5 days to be drawn in advance prior to closing depending on the time of year.

If you would like to email us about your scenario or have further questions, please feel free to email or call us at 888-269-8335.

Posted by Devin Murray on April 10th, 2017 12:32 PM

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