What are the differences with regard to home loans when it is used to purchase a newly constructed home or a resale home?
Home loans made on newly constructed homes differ from home loans made on resale homes in a variety of ways. These include:
→ Closing costs– Closing costs for a newly constructed home are often slightly higher than for a comparably priced resale home. This is because often times newly constructed homes will have additional title insurance provisions (known as Early-Issue Title Insurance), homeowner’s association charges, and additional appraisal requirements that are not applicable for mortgages made on resale homes.
→Prepaid Real Estate Taxes– The amount of estimated real estate taxes collected at closing for borrowers who choose to make their payments with their monthly mortgage payment can also vary drastically between lenders. Often times, lenders who are unaccustomed to providing home loans on newly constructed homes will collect an exorbitant amount even if the original disclosure documentation did not reflect that. Typically the preferred lender has worked with their underwriters to agree upon a more reasonable collection for taxes which is better for the home buyer.
→Appraisal– Appraisal requirements are often more stringent for a newly constructed home that for a resale home. The preferred lender understands this and often works with a consistent group of appraisers who have experience evaluating new homes. The relationships and systems that the preferred lender has built will result in a less stressful closing.
→Loan locks– Preferred lenders are typically more accustomed to managing interest rates over longer escrow periods than lenders who are accustomed to working on resale transactions which usually only have escrow periods of 30 days. Therefore, working with a preferred lender will often result in a better decision regarding your interest rate lock.