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FHA Construction Loans – Real or Myth? FHA Construction Loans – Real or Myth?(1)

 

FHA Construction Loans vs the 203K Program

There is a common misconception that the “FHA construction loan” and the FHA 203 renovation loan are one in the same.  This is not true.  Many lenders will tell you they are the same because those folks do not know about the true FHA construction-to-perm program.  The true HUD sponsored FHA construction to perm program is different in that it allows for a completely new home to be built, either a traditional stick-built home, or, a brand new systems-built(AKA “modular) home.  This is also not to be confused with a traditional FHA end loan for a newly built home.  Some lenders will try and tell you they can do FHA loans for newly built homes but that is not the same either.  Simply providing an FHA loan for a just-completed home is much different than a true construction-to-perm loan where by the land is acquired at initial closing with this loan, then draws are make to the builder as each phase of construction is complete.  This is a true construction-to-perm loan, not just an FHA loan that acts as the “end loan”.

FHA Construction Loans – The Benefits

Many folks ask why its so hard to find a bank that will even offer construction loans these days.  There are a number of reasons why construction loans are viewed as being high-risk these days but perhaps the most important one is the appraisal issue.  Because of the turbulent real estate market we are in right now, if you were to get conventional construction-to-perm financing from a bank and your builder begins construction of your home, the property might very well be worth less in just the short 5 months it takes to complete the home!  This is possible these days due to poor home sales in the same area negatively affecting the current value of your home which is still under construction.  To overcome this, the FHA construction home loan program is a 100% true “single close” transaction.  This means that there is no 2nd appraisal at the end, no re-qualifying the borrower, no re-pulling the credit report, and no re-verifying employment.  Once the initial closing is complete, the borrower is essentially out of the equation until the builder finishes the home.  You can use this loan to build your next dream home, and it works great with small builders as well as any of the big “track builders” such as Toll Brothers, Ryland, Pulte, D.R. Horton, and William Ryan Homes just to name a few.

What Banks offer FHA Construction Loans?
As you may have discovered already, very few banks offer the true FHA construction loans.  This is because significant infrastructure is required to facilitate these unique construction mortgages including the draw center, construction/builder underwriting dept, and more.  Also, the bank must be willing to lend their own funds during the construction phase and up until the home is complete, which very few banks are willing to do.  Still, there are a couple good banks out there who specialize in this program.  One of which is Joe Karns at Bridgeview Bank.

Author Joe Karns of Bridgeview Bank is a seasoned mortgage professional dedicated to bringing his subscribers relevant and useful information on how to compare construction lenders. Want a free construction loan consultation?   Check out Joe Karns at the following link for FREE expert advice on helping you source the best FHA construction loans.

Finding the Best Modular Builders for Your New Home Finding the Best Modular Builders for Your New HomeComments Off on Finding the Best Modular Builders for Your New Home

Finding the Best Modular Builders – Where Do I Start?

Got that new home you’ve been dreaming of having built? Many folks these days are considering a modular home for their construction project. What is a modular home? you may be asking. Well its not really a type of home at all, its a process of construction. I’ve laid out a few of the primary aspects to consider when looking for the best modular builders:

Best Modular Builders – The Process:

The primary misconception among the general public is that modular homes are the same as manufactured, or mobile homes. This is not true. What is true is that both modular and manufactured homes are both built in factories, usually in sections, then shipped to the construction site for assembly. The primary difference is that modular homes are built to the exact same local building code as a traditional “stick-built” house. In contrast, manufactured homes are built to a more lenient HUD code which is why they are viewed more unfavorably in regard to mortgage lending by the big banks including Bank of America, Wells Fargo, Chase, Citi, and others. During the factory phase of the construction process, nearly all of the core components of the home can be assembled within that temperature-controlled environment. Also, since the sections are essentially built on an assembly line, there is much lower chance for under estimating material and labor expenses. These two primary factors typically yield much greater efficiency and cost over-run protection during the home building process and therefore the cost per square foot of the finished home is often less with modular homes. Finally, there’s the main factor: time. Since the best modular builders are constructing most of the home in the factory, this dramatically reduces the amount of time it will take to complete your home. Most 2000 – 2600 sqft modular homes can be built in just a few months, where as the stick-built version of those same homes would take 6-7 months to complete. The key to remember here is that modular homes are not really a type of home, it is a process of constructing the home, regardless of what the plans/specs/elevation look like.

Best Modular Builders – The Players:

Its important to recognize that there are many more modular builders out there than most folks realize. Believe it or not, the largest builder in the country is actually a modular/factory-built builder: Champion Homes. Champion owns major sister companies including Genesis Homes, New Era Homes, Redman Homes, North American Housing, Carolina Building Systems, and others. When searching for the best modular builder, its good to first ask yourself the same questions as you normally would with traditional “stick builders” including, “What is my budget?, How customized do I want to make the home?, and How high-end do I want to go with all the finishes?”. Just like traditional stick builders, the best modular builders vary from companies that offer primarily entry level designs and price points, all the way up to luxury mansions with all the bells and whistles. Some of the best modular builders include but are not limited to: Illinoi-based Contempri Homes, Ritz Craft, Clayton Homes, ModuKraft, Cardinal Homes, and Michigan-based American Living Homes just to name a few.

New Construction Loans:

When looking to finance your new home construction project, be sure to consult a bank that is well versed in construction-to-perm financing such as Bridgeview Bank. This bank offers a unique FHA construction loan where by you can roll both construction and the permanent loan into one transaction, and with just 3.5% down payment.

In conclusion, when you are planning your new home construction project it is important to consider whether you’d like to enjoy the benefits of utilizing modular construction. If so, keep the above pointers in mind when searching for the best modular builders.

Author Joe Karns of Bridgeview Bank is a seasoned mortgage professional dedicated to bringing his subscribers relevant and useful information on how to compare modular builders and construction loans. Want a free construction loan consultation?   Check out Joe Karns at the following link for some FREE  expert advice on helping you source the .best modular builders

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