Gene's Chicagoland Mortgage Blog: May 2022

The Blueprint for a Successful New Construction Purchase

The Blueprint for a Successful

New Construction Purchase

If you're a homebuyer that's either bought a home or been looking for one over the last year or so, you probably can verify this statement:

Being a homebuyer isn't for the faint-hearted.

Housing shortages ... the pandemic ... shifting interest rates, and more. Each has contributed to the current housing market being like no other in the past.

The housing shortage and rising rates have affected both potential and successful buyers alike. First-time homebuyers have been hit especially hard.

There is good news to report, however. Homebuilders have taken note of the shortage and the need for more housing.

As of this writing, my research shows there are currently over 728 new construction homes available for sale in the Chicago southland's Will County alone. And a great many of those homes are being built with first-time buyers (or those downsizing), in mind.

Buyers have taken note of this surge in new construction. As a result, I'm receiving a dramatically higher number of calls and questions regarding new construction financing.

Those calls include the questions:

How do you buy a new construction home?
How is it different from buying an existing home?
How and when do I get my financing for a new construction home?
What's the time period typically needed from contract to closing day?
Can I lock in an interest rate for my purchase?
More ...

Now, while existing home and new construction financing is vastly different in most ways, there is one important similarity between the two. That is regarding the need for buyers to speak with a lender prior to starting a search and viewing of homes.

When that very important pre-emptive step is taken, a buyer can be pre-approved. They can move forward fully aware and educated about their financing capabilities and options.

Simply, they know what they can (and can't) afford when starting their home search. This one action is extremely beneficial in a myriad of ways.

The differences that exist between the two forms of home purchase reveal themselves immediately. The first difference includes the viewing and touring of homes for sale.

A prospective new construction home build, at least in the Chicagoland area, is conducted from Model Homes and/or Sales Offices typically found within the subdivision/location under consideration. At new construction visits and consultations, homebuyers may or may not see an actual physical home. The home "viewing" may be in the form of house plans and layouts.

Buyers are often offered options to semi-customize their new home by the builder's sales team. Buyers choose customization features from a list or menu of items available. Possible upgrades and modifications are often discussed at this point too.

As a new construction loan officer: I suggest that any buyer considering the purchase of a new construction home work with a buyer's agent ... experienced in new construction purchases.

Have your buyer's agent at your side during all viewings, tours, and consultations with the builder's sales team. They'll represent your interests and be your advocate and advisor during your entire transaction.

Upgrades and modifications shown to you by the builder's sales team can be, to say the least, very tempting. But remember to pay attention to your bottom line (the pre-approval figure provided by your lender), as these options and customizations can run up costs on a home quickly.

(Again, this is why I so strongly urge buyers to be pre-approved for a loan prior to visiting a home or builder. With a pre-approval, buyers know what they can and can't afford (be approved for).

New construction buyers should also be aware that:

Most home builders will require a small deposit to hold a lot until a contract can be agreed upon
It is wise to negotiate a price first. Discussions regarding home building options, credits, and financing can take place afterwards. (Builders often try to intertwine these discussions. )
Homebuilders typically require a deposit or payment to be paid prior to the start of construction (typically 10% of the final negotiated Purchase Price)
Fully-completed new construction homes are sometimes available within subdivisions as well. Minor customizations are sometimes still possible and negotiable when purchasing these completed homes
Buyers should demand a full accounting from the builder on future tax bills on the fully-improved home, (not just taxes upon the lot)

With most new construction purchases (again, those in the Chicagoland area), builders usually have their own banking relationships or cash funds to complete the construction of their homes. The builder typically funds its own construction process.

However, a downpayment fee may still be required by some builders prior to the start of construction or at the signing of the contract. The remaining payment on the sale is made at the time of closing.

New construction buyers should know and fully understand the following prior to signing their contract:

The timeline/completion date for their home. Traditional timelines for new construction have run 90 to 180 days, but with supply-chain issues/pandemic delays, construction times are now sometimes running longer
Interest Rate Locks: Typically, interest rate locks run for 60 days, but some lenders offer 90-day locks. An even smaller number of Lenders will offer what is called an "Extended Rate Lock" to cover a buyer/borrower from start to finish/closing on a new home

As I stated above, only some lenders offer rate locks for an entire build-out ...

But some costs are typically charged by the lender in order to help offset the risk of rate increases that may take place. (Ask me about the options available to you during your new construction financing)

If you're a prospective new construction buyer that currently owns a home, but it has not sold yet, consider this prior to taking action:

How will you fund a deposit/downpayment needed by a home builder?
Does the home builder consider contingency deals?
If your home sells prior to your new construction completion, where will you live or stay until the new home is completed/Closing Day?

There's a lot to know and consider before you make a final decision regarding a new construction home purchase.

Do some homework first. Take the time to educate yourself. Be sure to ask questions of your builder (and loan officer) before you make your final decisions and contract for a home purchase.

Want to know more? Contact me to get started …

* Gene Mundt, Loan Officer - American Portfolio Mortgage Corp, is the preferred lender for GDP Homes. Please visit the GDP Homes website for further information on those homes offered by GDP ... or reach out to Gene Mundt regarding the special financing available for GDP Home purchases.

Are you hoping to Construct, Buy, Refinance or Purchase a home or investment property in Chicagoland or somewhere else in Illinois or Wisconsin?

Looking for mortgage financing answers, options, solutions, and experienced assistance?

Contact me! I'll put my 40 years of Mortgage experience and expertise hard to work on your behalf.

I'm easily found at:

Gene Mundt

Mortgage Originator -NMLS #216987 - IL Lic. 031.0006220 - WI License #216987

American Portfolio Mortgage Corp

NMLS #175656

Direct: 815.524.2280

Cell/Text: 708.921.6331

eFax: 815.524.2281

www.genemundt.com

gmundt@goapmc.com

Gene Mundt, Mortgage Originator, an Originator with 40+ years of mortgage experience, will offer you exemplary mortgage service and advice when seeking: Conventional, FHA, VA, Jumbo, USDA, and Portfolio Loans in Chicago and the greater Chicagoland region, including:

The Lincoln-Way Area, Will County, (New Lenox, Frankfort,

Mokena, Manhattan, Frankfort Square, Joliet, Shorewood, Elwood, Lockport, Wilmington, Crest Hill, Symerton, Braidwood, Channahon, University Park, Beecher, Plainfield, Bolingbrook, Romeoville, Tinley Park, Homer Glen, Crete, Peotone, Naperville, etc.), DuPage County, Kane County, Grundy County, the City of Chicago, Cook County, and elsewhere within IL & WI.

#homeselling #PreApproval #mortgageconsultation #positioning #housingmarket #mortgageapplication #InterestRates #homebuying #refinancing #homeloans #talkwithalender #PreApproval #stoprenting #newconstruction #securerate #househunting #mortgage #ratelock

#GeneMundt #NewLenoxMortgageLender #ChicagolandMortgageLender #howmuchhomecanIbuy #whatinterestratecanIget #timing #mortgageexpert #moneytalk #homeloansmadesimple #experiencecounts #homebuilding #float #lockarate #askquestions

#housegoals #VAloans #home #homeloanpro #JolietMortgageLender #WillCountyMortgageLender #DuPageCountyMortgageLender #GrundyCountyMortgageLender #ChicagoHomeLoans #NewLenoxRealEstate #mortgageinfo #newconstructionloans #endloans #credit #creditreport #40YearsOfExperience #WisconsinMortgageLender #ChicagoMortgageLender #FHAloans #condoloans #investmentproperty #mortgageconsultation #LincolnWayAreaMortgageLender #personalfinance #mortgageprocess #homebuyingprocess #housingmarket #changes

Gene Mundt, Mortgage Originator - NMLS #216987, IL Lic. #0006220, WI Licensed. American Portfolio Mortgage Corp. - NMLS #175656 - IL Lic. #031.0006220

I am a 40+ year veteran of the mortgage/banking industry with extensive expertise and education in mortgages, appraising, management, and financial planning. My assistance is ongoing, as I provide info, advice, and service leading up to, during, and following my clients' mortgage financing process. I aim to develop trust-based relationships that encourages asking questions freely.

Financing Options That Can Help in a Tough Housing Market

Financing Options That Can Help

in a Tough Housing Market

Homebuyers hoping to enter the housing market are currently facing the twofold challenge of low housing inventory and rising interest rates ...

A recent report (Oct 5, 2021) by the U.S. Census Bureau states this statistic: Homeowner households had a median wealth of $269,100 compared to $3,036 for renters.

A Harvard study showed that: A person 65 years of age that had been a homeowner was worth 44 times more than someone who had rented.

Staggering statistics ...

Both provide a convincing argument for homeownership. And it's a message that obviously resonates with many, as a Pew Research survey showed that 72% of renters want to own a home one day.

So, you have a large number of people that want to buy a home. But you also have a significant portion of those people facing some obstacles that prevent them from doing so.

How can those obstacles be addressed?

While the rise of housing prices may slow over the coming months, or even recede in some areas, it's seems unlikely that an answer lies within home prices alone. Historically prices have risen. Odds are, prices will continue that upward trajectory in the future, just at a slower pace.

The number of homes for sale on the market will most likely rise in the future too. That theory is supported by the percentage (82%) of millennial homeowners now reporting that they are currently making home improvements with that goal in mind. Their updated homes will be listed and available for purchase at some future date.

But fact is, the individual home buyer does not command the housing market. They're not in the driver's seat when it comes to housing availability nor do they control housing prices either. However, they can influence the interest rate and loan programs that they personally qualify for at the time they choose to buy/refinance and apply for a loan.

It's important to share this message: Those financing a home hold power over the interest rate or mortgage programs available to them.

To a large degree, they remain in control of their financing destiny. With time and effort, they can "stage" and position themselves into maximum effectiveness as borrowers applying for loan.

What's their end goal?

To create as many options as possible for themselves. Those options are earned by:

Building a good credit history
Paying bills on time
Saving money
Not over-spending
Spending wisely
Eliminating debt wisely
Consulting with a lender

The good news is that many options do exist, even in a tougher more challenging market ...

One such option is Private Mortgage Insurance (PMI). PMI may be a sound viable solution for those buyers that have saved only a small down payment.

Saving for a downpayment has certainly gotten tougher. Because of that, Private Mortgage Insurance (PMI) is once again gaining in popularity.

Why?

When utilized, Private Mortgage Insurance (PMI) enables borrowers to receive Mortgage Approval, even when they have placed less than 20% down payment on a home purchase. That's a very welcomed advantage.

Costs for PMI are based on the increments of down payment percentages made by a borrower (3%, 5%, 10%, and 15% down payment).

The greater the down payment percentage: The lower the PMI payment is...
Credit Scores: Credit scores affect the cost of private mortgage insurance. The higher the credit scores, the lower the PMI is...

It must be noted that ...

Two forms of Mortgage Insurance (MI) exist: Conventional Loan PMI and FHA Loan MIP
There are multiple payment methods available for PMI: PMI can be paid by a borrower in one lump sum at the time of closing as part of the closing costs. In some instances, lender-paid mortgage insurance is also an option available to Borrowers.

As you can see from the info provided above, Private Mortgage Insurance ... or any loan program ... is not a "one-size-fits-all". Every Borrower's borrowing scenario is different with unique features and circumstances.

It's why I say, anyone considering the purchase or refinancing of a home, should consult with a lender as early in the process as possible. That way a thorough analysis of of your individual credit/debt, credit report, and goals can be conducted, beneficial comparisons can be made, and specific recommendations and advice can be shared.

I'm easily found at:

Gene Mundt

Mortgage Originator -NMLS #216987 - IL Lic. 031.0006220 - WI License #216987

American Portfolio Mortgage Corp

NMLS #175656

Direct: 815.524.2280

Cell/Text: 708.921.6331

eFax: 815.524.2281

www.genemundt.com

gmundt@goapmc.com

The Lincoln-Way Area, Will County, (New Lenox, Frankfort,

Cook County, and elsewhere within IL & WI.

#homeselling #downtime #renovations #remodeling #homeimprovement #HELOC #savingmoney

#PreApproval #mortgageconsultation #proactiveactions #positioning #housingmarket #timeout

#mortgageapplication #InterestRates #homebuying #refinancing #homeloans #talkwithalender

#PreApproval #stoprenting #newconstruction #securerate #househunting #mortgage

#GeneMundt #NewLenoxMortgageLender #ChicagolandMortgageLender #howmuchhomecanIbuy #whatinterestratecanIget #timing #mortgageexpert #moneytalk

#homeloansmadesimple #experiencecounts #homebuilding #float #lockarate #askquestions

#housegoals #VAloans #home #homeloanpro #JolietMortgageLender #WillCountyMortgageLender #DuPageCountyMortgageLender #GrundyCountyMortgageLender #ChicagoHomeLoans

#NewLenoxRealEstate #mortgageinfo #newconstructionloans #endloans #credit #creditreport #40YearsOfExperience #WisconsinMortgageLender #ChicagoMortgageLender #FHAloans

#condoloans #investmentproperty #mortgageconsultation #LincolnWayAreaMortgageLender

#personalfinance #mortgageprocess #homebuyingprocess #housingmarket #changes

Gene Mundt, Mortgage Originator - NMLS #216987, IL Lic. #0006220, WI Licensed. American Portfolio Mortgage Corp. - NMLS #175656 - IL Lic. #031.0006220

Remodeling Then Selling? Make These Improvements Too

Remodeling Then Selling?

Make These Improvements Too

Today's challenging housing market and rising interest rates have many applying the brakes on their home buying dreams.

They've decided to "wait out" the current challenges and are taking a "time out" to consider what other options are
available to them at this time.

It's been reported that a large percentage of these homeowners have already made a decision regarding those options and they've decided to put their downtime to good use.

They're going to upgrade, repair, and remodel their homes instead of moving on. Tappable home equity is fueling and paying for much of the work.

In fact, Discover Financial Services found in a recent survey that "58% of Gen Z and millennial homeowners are currently working on home improvements or plan to do so within the next three months", (as of 3-30-2022). They also found that the majority of the homeowners, 82%, say they're improving their homes as a form of investment for their future.

Those projections and percentages are being backed up by Bill Darcy, CEO of the National Kitchen & Bath Association. His association predicts a 19% increase in kitchen and bathroom projects alone this year.

Approximately 20 million American homes presently fall into what Mr. Darcy calls “prime remodeling age”. That means they’re 20 to 40 years old and ripe for upgrades and remodeling.

20 million homes!

If you can believe statistics, many of those improved homes will hit the market at some point in the near future. A new survey conducted by Nerdwallet.com found that nearly "1 in 10 U.S. homeowners (9%) plan to sell their home in the next 12 months".

The survey also found that 86% of those potential home sellers intend to spend money on major home repairs or renovations so their home appeals to a larger number of potential home buyers when they decide to list. That's all very positive news.

Why?

That news and those statistics equate to more homes available when prospective buyers (both those selling and buying again or first-timers) end their "time-out" and re-enter the housing market. And the homes that they'll have to choose from at that time will be outfitted and updated with features that will better meet their living demands and tastes.

A Win-Win!

But are there other "upgrades", "renovations", and improvements that could be made (whether home seller or buyer)?

Could this "timeout" and period of downtime from the housing market be put to use in other ways as well?

Could upgrades and renovations be made that will also increase:

The chance of saving money (both in the short and long term)?
Broaden the number of housing options available when buying (whether first-time or step-up buyer)?
Expand the number of financing options available (whether for a mortgage or HELOC)?
Make navigation of a future transaction easier and more fluid?
Increase the chances of successfully transacting a purchase?

And if so, what are those upgrades, improvements, and renovations?

Whether you're someone planning on selling your home in order to buy again ... or a first-time buyer new to the housing market, consider the following pre-emptive actions:

Keep an eye on your credit and credit scores (A free credit report can be easily obtained at www.annualcreditreport.com)
Pay down credit cards when and where possible. Keep an eye on your credit limit. Never let the balance owed exceed that limit
If trying to pay down your credit card debt, pay the balance down to under 50% (minimum), 30%, or 10% of the high limit allowed. This indicates to mortgage underwriters that you're able to restrain from using available credit
Focus on saving (or saving more) for your downpayment
Talking to a loan officer now, proactively and well in advance of taking action. Take measure to fine-tune your finances, debt, and credit or better position yourself

And remember, if during your time-out/downtime you're also considering:

A new job position
A change of employment type
A change in the number of hours you're working
Thinking of starting a new business and becoming self-employed, etc.

... it's even more important that you take action and talk to a lender PRIOR to making any of these employment changes.

Any of these changes mentioned could affect WHEN or IF you can buy in the short term. It could also alter WHAT price home you can purchase.

Acting proactively pays off ... as remodeling, renovating, and improving your home AND your credit/personal finances can reap you great ROI (Return on Investment).

Don't overlook this powerful combo. When paired and conducted together, they can deliver you a powerful "one-two punch" at the time you buy and finance a home.

Talk to a loan officer today to discover the improvements and renovations that can be conducted to improve your position and finances. Learn all the options you have at your disposal and put them to good use prior to making your housing decisions and moving forward.