When you want to build/buy and finance a home, you’ll need to get a loan; banks typically issue you a loan through two stages. These are called construction-to-permanent loans. Until your home is complete and appraised, the loan will be a construction loan. During this time, you will be making “interest only” payments. Once the home is complete, the loan will become a mortgage. At that time, you’ll start making regular payments against the total loan amount.
Step 1 – Get a Prequalification Estimate
Make sure you know your credit score to get an accurate mortgage estimate and how much you’re able to spend on a new home.
Bring your bank financial information and general credit history, and they will be able to provide you with an estimate on how much they would be willing to lend you and what the interest rates could be.
Step 2 – Compare Rates
Go to at least three different banks for quotes to see what rates you can get. Even a small difference in a rate can mean thousands of dollars over the life of the loan.
Step 3 – Apply
Once your planning is done and you’ve picked out land to build on, you’re going to need to apply for the loan.
Step 4 – Get Approved
When the bank approves the loan, they will send you a letter of commitment in the mail. You will need to show this letter to the manufacturer or a seller if you’re buying land before signing the final contract.
Step 5 – Set Up a Disbursement Schedule
Once you receive final approval, create a timeline for paying off the property and any other costs associated with constructing your home to show the bank throughout completion.
Step 6 – Close the Loan
After a disbursement schedule has been set and agreed upon the loan will be closed. You and the bank will sign the final documents and pay closing costs.
Step 7 – Build Your Home
During the time that your home is being built, you’ll be making interest payments to the bank every month until your home is complete. That’s why going modular is a huge win. Modular homes get built in half of the time traditional homes.
Step 8 – Make Your Loan a Mortgage
Once construction has been completed, the bank will inspect and appraise the house. Next, the loan will become a permanent mortgage, and you can start making payments on your brand new modular home!