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Investment Real Estate Opportunities
Pre-Construction Custom Homes
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Frequently Asked Questions
It is our goal to answer as many questions as possible for you. If you have questions which are not addressed in the following please email info@pricemorgan.com. Thank you.
General Questions
What is the price range for these homes?
Prices range from the mid $500,000's up to $1.5 million. In most cases the higher the home price the more efficient the building costs and the greater the margin between cost and appraisal/market price.
Do I need to pre-qualified? What do I need to proceed?
Yes, 700 FICO score and cash reserves of $20,000 to $100,000 depending on the home price.
Process Questions
Can the contract be done in an LLC?
Yes, as long as the individual buyer qualifies.
How soon can I sell my house?
The process of marketing the home will commence immediately upon the start of construction.
Is this project available to foreign investors?
Yes, as long as the deposit checks are drawn on US banks or the client provide a US Bank Draft.
How will lots be selected?
Lot selection will be performed by the developer on a first come first serve availability.
How are house plans selected?
Home plans are selected by the builder with your input to price range. Plans are selected that are unique and custom with features appealing to most home buyers, with the intent to sell as quickly as possible.
When is the closing date?
Closings are expected within 45 days or less of submit of application and contract.
Can I "assign" my contract?
The nature of this program is such that "closing" is actually prior to construction and an assignment is not an option. However, your home can be sold prior to its completion in which case the transfer of ownership would take place after Certificate of Occupancy (completion of construction).
How long will it take to build the home?
Most homes take about 9-12 months, depending on the size.
What contingency plan exists in case the developer does not finish or if the construction prices go up?
The Developer wants to complete the home as quickly as possible, too. The construction to perm loan package you receive will be based on pricing and information available at that point in time. The builder must adhere to these cost estimates to do construction draws from the lender.
What happens if the house does not sell prior to Certificate of Occupancy?
One of two things will happen. 1) You will use your personal cash reserves to cover any carrying costs while the home continues to be marketed to procure a buyer/end-user. 2) In some cases there are contingency plans in place to cover the costs with no out of pocket expenditures to you the buyer. This can include staging the home with furniture to make it more attractive to market. You will need to refer to the specific program you purchase in for details.
Financing Questions
Is there a preferred lender?
Yes. To provide the highest level of efficiency a specific lender is in place for your benefit.
What is a "Construction-to-Perm" loan?
This is a one-time close loan. Rather than acquiring a "construction loan" then getting a "permenant loan" once the home is completed the "construction-to-perm" loan has a one-time close at the beginngin of the process to save time, money and paperwork. This is the preferred financing method for home construction.
Which type of loan can I do? Full Doc or Stated Income Loan?
You may do either depending on your individual scenario.
Full Doc: A full doc loan is one that requires that the borrower present all necessary documents, including income verification to be considered for the home loan. This type of loan usually offers lower rates because it is less risky for the lender. On the other hand, if you are self employed you may not have all of the required documents and should look into a stated income loan.
Stated Income: Stated income home loans allow those who are self employed or do not have documentation of earned wages to state a wage on the mortgage application and qualify for a mortgage based on that stated income. The advantages of a stated income home loans allow those who are self employed or do not have documentation of earned wages to state a wage and qualify for a mortgage based on that stated income. The advantages of a stated income loan are that the borrower does not need to verify income and approval is generally faster than with traditional home loans. With this type of loan interest rates and the required down payments are often higher than with traditional home loans.
What are the estimated closing costs using an average purchase?
Closing costs vary depending on the buyer's loan package selected, credit rating, type of loan, down payment etc. You will receive a good faith estimate from the lender for these fees.
Please explain what is the escrow and how does it work.
Escrow is the process and function of the title company which is to hold funds or documents by an impartial third party (between the buyer and the seller) for the two participants in a business transaction. When the transaction is completed, the escrow agent releases the entrusted property. In a construction to perm loan, there is a process where twice a month an escrow draw will be released (you will have to sign for these releases) for the purpose of paying the vendors who are constructing the house i.e. plumber, painter, drywall, electrical etc.
Fee/Expense Questions
Who pays the utilities on the home?
Any utility bills are out buyers funds from escrow.
What are the HOA fees?
HOA fees are not paid out during construction. If payment were required it would be paid out of escrow. HOA dues will not be an issue until after the house is completed.
Do I need to make payments during the construction process?
No, construction-to-perm loans do not require payments during construction.
It is mentioned about taxes: 1% of the purchase price. Who pays for them? Is it the buyer at the time of purchase?
The taxes are not an item that the client has to deal with during construction and "if" it were it would be paid out of escrow. This does not become an issue until certificate of occupancy is issued.
Other Questions
What does HOA mean?
HOA means Home Owners Association where an association collects monthly, quarterly or annual dues from homeowners for maintaining the common areas of the development.
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