New Construction: Addressing the Chicago-Area Housing Shortage

New Construction:

Addressing the Chicago-Area Housing Shortage

There's a home inventory shortage currently being experienced in the Chicagoland area, just as there is all across the U.S.  A report issued last year by Crain's Chicago Business proves that to be true, as it states that the number of homes for sale in the Chicago market is at its lowest level in over 13 years.  

That housing shortage is affecting first-time homebuyers especially hard.  Homebuilders have taken note.  As a result, many builders have begun tailoring their new construction projects and homes to please the eye and fit the lifestyle of younger first-time buyers.

I did a little research of just a small portion of the Chicago-area housing market ... a 10-mile radius in Will County (located south of the City of Chicago) ... just to see what kind and how many new construction projects were to be found.  

At the time of this writing, there were almost 500 new construction homes available on the current market and available for purchase.  Imagine the possibilities and numbers available throughout the entire Chicagoland region.

30 of those new construction homes were located in my hometown of Manhattan alone.  New construction dots the landscape everywhere currently.  Other smaller communities within Will County, such as Channahon, were seeing fluid activity, as well.  That's positive news.

But besides the "new car smell" and capability of customizing and personalizing a new construction home, what are some of the other benefits to be found when purchasing a home of this type?  

Some of those benefits can be:

• It's new!  Warranties are typically available on everything from materials to appliances and workmanship
• New products typically are constructed and run more energy efficiently.  Many newly constructed homes have been built with "green" features.
• Safety can also be a plus, as new materials and construction standards have improved 
• Security features and technology has become almost standard in new construction homes
• More ...

For those considering the purchase of a new construction home, there are a few different and additional things they must know and consider as they enter the process, as the new construction buying and financing processes are quite different from that of an existing home.  

Those differences begin immediately upon the viewing and touring of a prospective home.  In the Chicagoland area, a majority of the new construction market is sold from Model Homes and Sales Offices found within the subdivision under consideration for purchase.  

As with any home purchase, a new construction buyer should only view homes after speaking with me, your mortgage lender.  That way you are pre-qualified and fully aware of all your financing capabilities and options before moving forward.  And you know what you can (and can't) afford.  

New construction buyers must:

• Be aware that Home Builders will REQUIRE a small deposit to hold a lot until a Contract can be agreed upon
• Be prepared to negotiate their best price first.  Then and only then, should they discuss home building options, credits, financing.  (Builders often try to intertwine these discussions) 
• Understand that Home Builders will typically REQUIRE a deposit or payment be paid PRIOR to the start of construction (typically 10% of the final negotiated Purchase Price)

If you are a new construction home buyer that already owns a home and it has not sold yet, you must also consider:

• How you will fund the deposit/down payment needed by the Home Builder
• If your home sells prior to your new construction completion, where will you live or stay until the new home is completed/Closing Day?

An extremely important, but often overlooked and under-estimated cost of buying a new construction home, surrounds tax bills.   I've written extensively on this topic.  

It's important that buyers of new construction homes ask questions regarding their tax bills, both their first bill and their anticipated future bills.  Township assessors (for Will County Townships, click here) should be able to provide this extremely important information for any prospective home buyer.

As most buyers must finance their new construction purchase and obtain a mortgage, it's also important that new construction home buyers have a full understanding of the financing terms for their home.  

Financing terms are typically different for new construction homes versus those for existing homes.

New construction buyers should know and fully understand the following information obtained from their Builder and Lender:

• The timeline/completion date for their home:  Typical timelines for new construction can be for 90 to 180 days, but some run even longer  (Contracts on Existing homes typically run 30 to 60 days)
• 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.  

New construction buyers should remain vigilant and in contact with their builder and lender throughout the construction process, as this will make for a more fluid and successful Closing upon completion of construction.

Because of the current housing market shortage ... and for many other reasons ... a new construction purchase can be a very viable and wise choice for home buyers.  But anyone purchasing new construction will find it extremely beneficial to familiarize themselves with construction "lingo".  

I always advise any buyers/borrowers educate themselves and perform preliminary homework prior to their buying.  In other words, they should have a thorough consultation with a lender. 

That is particularly relevant for new construction buyers/borrowers, as it helps them secure the best home possible, and processing and financing are far more stress-free and progress much more smoothly.

If you are considering the purchase of a new construction home in Will County - Chicagoland - IL & WI, please reach out with your questions.  Together we'll go over all your options for purchase and financing and then apply for options while moving forward with your purchase.

* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicago - Chicagoland - IL/WI?

Contact me today! I'll put my 40 years of mortgage experience and expertise 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: 708.921.6331

eFax: 815.524.2281

gmundt@goapmc.com

www.genemundt.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.

Referrals are Appreciated & Welcomed!  

"Need to Knows" When Buying New Lenox - Chicagoland New Construction

"Need to Knows" When Buying 
New Lenox - Chicagoland New Construction

With so many housing markets across the country experiencing a severe shortage of existing homes for sale ... in growing numbers, new construction homes are garnering serious consideration from home buyers ... 

There are a variety of factors at play explaining this growing interest in new construction.  The fore-mentioned supply shortage is just one.  Certainly, the condition, location, and features found within many of the existing homes found on the market are also contributing to their sale numbers falling short of expectations and hopes.  

The "new car smell" or prospect of being able to personalize and semi-customize a home is moving many prospective homebuyers to consider new construction as an option too.  Who wouldn't consider this option an exciting one?

But if the purchase of a New Lenox- Chicagoland new construction home sounds enticing to you ...  there's a few "need to knows" you should be aware of prior to your home search and purchase.  

As with any home purchase:  It's best to start with an understanding of the home buying and financing processes.  

With a new construction purchase:  It's smart to go one step further.  Take the time to educate and familiarize yourself with new construction terminology and a thorough knowledge of the construction process in your area.

In the New Lenox - Chicagoland area you'll find:  

• Most lots are platted, subdivided and owned by Developer/Builders  
• These new construction homes are marketed and sold from Model Homes - Sales Offices, most often located within the subdivision being considered for property purchase  
• Home buyers can semi-customize their home from a menu of features offered by the Builder 
• Note:  Fully-completed new construction homes are sometimes available within these subdivisions as well.  Minor customizations are sometimes still possible and negotiable when purchasing these completed homes  

With this type of new construction purchase:  The Builder typically funds their own construction process (usually with their own banking relationships, or cash).  However, a downpayment fee may still be required by the Builder prior to the start of actual construction or at the signing of the contract.

When the home is completed, the Builder sells the home outright to the new contracted buyer. Previous to this time, the buyer must have secured traditional mortgage financing, according to the agreed-upon Sales Price.  A Closing on the completed home takes place after the Final Occupancy Permit is issued. 

Should you be building a home on a lot you own:  You most likely will need to secure a Construction Loan (something not always easily found these days).  

After construction is completed:  You will need a permanent, or "end loan" to pay off your Construction Loan. (Construction Loans are typically a short term, interest only type of loan ... not intended to be for a Fixed Term, such as 15, 20, or 30 years.) 

Your permanent "end loan" Mortgage will be based upon the "completed" value of your home, as determined by your Mortgage Lender's Appraisal.   This value estimate is typically in line with the cost or value of the lot, plus the Construction Costs (Labor and Materials). 

In these circumstances, your new "end loan" loan is considered a Refinance.  Loan-To-Value considerations for your loan are based upon the new Appraised Value.

Now that you know the basics of the new construction process, the next step is deciding:

• Which Builder to work with 
• The location of your new home 
• The model home you like  
• The amenities you desire (and can afford)

How do you do that?  

• Strongly consider working with a Buyer's Agent  
• Find a new construction Buyer's Agent that knows, understands, and has experience representing buyers in the new construction process   

Ask each Builder you are considering these important questions prior to taking the next big step, signing a Contract:

Do you negotiate the price of:

     1.  Options or amenities?  
     2.  Upgrades, features that are "add-ons" to the base home price?  (Don't assume they won't, or can't, negotiate on price/costs.)
     3.  If offered, are the "free options/upgrades" for using the Builder's preferred or suggested Lender built into the Builder's sales price (is the price "padded")?

• Ask the Builders (or their sales representative): 

     1.  How are the estimated real estate taxes figured? 

     2.  How are they prorated?  

     3.  Who pays the next tax bill?  

     4.  When does that payment take place? 

     5.  What are my responsibilities (as the new homeowner) in regards to that tax payment and receipt of that tax bill?

Remember:  With new construction, the property taxes for the first year will,  most likely, be minimal.  Once the home is completed, an Occupancy Permit will be issued and the sale Recorded.  The Assessor then acknowledges the sale.  

After the next assessment cycle:  The Assessor will fully-assess the property, back-dating the assessment to the date of Closing.  This typically results in a larger tax bill in the second year of ownership.  

The Lender typically collects escrow monies based on the original low tax bill, which is based on the vacant lot.  Taxes are typically paid in the year following the Assessment or Tax Bill.   

Example:  2016 property taxes will be disbursed throughout Chicagoland suburbs soon.  They are payable in two (2) installments, normally June and September.  (Note: Cook County has its own timetable for release of tax bills.)  

At the point that your new (increased) tax bills are received, your Lender will "adjust" your monthly escrow payment upwards to reflect the new higher tax bill amount (attributed to the completion of the house on a previously "vacant" lot).  This catches many new construction homeowners unaware.  

(See my post "Love Your New Construction .. But Educate Yourself About Future Tax Bills" for further info and explanation regarding this.  Contact me if you have questions.)

 Your Mortgage Lender will now require one of two things:     

     1.  A sizeable "lump sum payment" made to your escrow
     ... or
     2.  A significant monthly escrow payment increase to help you "catch up" on the shortage in escrow

The bottom line for new construction Buyers is:  

There's a lot to know and consider before you make a final decision regarding a new construction purchase. Be aware of this fact and take steps to ...  

Educate yourself.  Do your homework.  Ask questions of your Builder (and Lender) prior to making final decisions and contracting for your home purchase.   

You'll be very glad you did, especially at property tax time ...   

    

        
* Hoping to buy new construction, an existing home, an investment property, or refinance a home in New Lenox or elsewhere in the Chicagoland area?  
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 Licensed

American Portfolio Mortgage Corp.

nmls #175656

Direct: 815.524.2280

Cell or 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, Joliet, Shorewood, Crest Hill, Plainfield, Bolingbrook, Romeoville, Naperville, etc.), DuPage County, 

the City of Chicago, Cook County, and elsewhere within IL & WI.

Referrals are Welcomed!

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.

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