I hate numbers, math, finances, anything except actually spending the money. Thankfully, I have a husband who is amazing with that stuff (hence the guy getting his MBA). Unfortunately, when you’re buying a house, numbers and budget come into play in big ways so understanding how the loan process works and how to survive financing (much less financing a new construction, which is weird enough since you’re starting off financing a house that doesn’t exist) is important. Needless to say, I’ve now learned more than I ever wanted to know about financing a new construction.
Knowing what I know now, I’m hoping to help you avoid some of the pitfalls (or at least some of the stress) that we managed to step around (mostly by accident or sheer luck) when it comes to financing a new construction. The key (which I didn’t include below)? Coffee. All the coffee. You gotta stay alert for keeping track of all those numbers and a yummy-tasting coffee puts you in a better mood.
How to Survive Financing a New Construction
Get your credit and savings in order.
If there’s anything iffy on your credit report, call your cards/lenders/etc. to see if they’d be willing to take it off. You can also fight it with the credit bureau and sometimes improve your score that way. Get your credit cards down to at least 75% (preferably lower or completely paid off, but reality sometimes makes that not doable and I get that!). Have as much in savings as possible so you have earnest money, down payment money (unless you’re doing the VA loan for less than your county’s max), moving money, and eating out money (because cooking AND moving is rough) without giving yourself a stomach ulcer while you’re financing a new construction.
Check out several lenders.
Don’t just go with the builder’s lender because they’re giving you a credit for using them. Ours actually wound up costing the same as other lenders, even with the credit included, because their costs were higher. We went with a different lender who matched the builder’s APR AND the credit, so we saved a significant chunk on closing costs!
Keep a folder going!
When you decide to start your financing stuff (usually before you even choose a home, lot, etc.), start a folder! Whether it just sits on your desk or in a file cabinet, get one going so you can easily just throw everything the builder and lender send you into it. Better yet, start a binder– I listed all my favorite moving binder items here! Even if you don’t keep it organized (I do, but I know some people are less nutty), it’ll be an easy go-to place to find that floor plan or those estimates.
Scan everything in.
In this digital age, you’ll be emailing things a whole lot more than you’ll be mailing or taking paper copies in. As a lender requests something, scan it in and keep it in a digital folder, too. That way, when a different lender (you should get a few pre-approvals so you know you’re getting the best rate) asks for the same thing, you can send it right over, instead of having to find that W-2 or pay stub again.
Learn to read loan estimates.
There are about a dozen terms on the loan estimate I’d never seen before, so I did my research and I learned what they all meant. You wouldn’t spend money on a random item at Target if you didn’t know what it would do for you– don’t do it here, either!
Give yourself PLENTY of time.
The key to surviving financing is to keep it as low-stress as possible. When it comes to financing a new construction, emotions are high, so give yourself PLENTY of time to have them come back and say you’re missing something, they need more information, etc. You don’t want to get to a couple of weeks before closing, just to find out that a step was missed and your closing date has to get pushed! Plus, by giving yourself plenty of time, you can enjoy the process of the build and getting ready to move into your dream home, knowing everything is settled with financing a new construction.