It’s an exciting time preparing to have your new home built. Of course every borrower and every building or even landscaping project is unique but there some things which apply specifically or certainly generally to everyone. If you have obtained a mortgage before, please understand that the finance for an existing property is not the same as obtaining finance to build a new home. In fact the more research, the more hard work you do on the topic the better prepared you will be. And as this is such a large project and almost certainly the largest financial investment you will ever make, getting things right first time requires a bit of effort on your behalf. Remember the age-old advice — if you fail to prepare, you prepare to fail.
Now making an application for finance involves a fair bit of form filling. You’ve got two main avenues of attack.
- You can approach your bank and make application or
- You can go to a financial broker who is experienced in helping homebuilders find finance for the project
In some cases there may be no cost to you in using a financial broker because they have contacts with lenders and if your application is approved, the lender may pay the broker for directing your business their way. Consider all possible options. You want a stress free application process. You want an excellent financial deal. And you want things completed as soon as possible.
Obtaining a loan usually goes through two stages. The first is called the pre-approval stage where you cross the various hurdles the lender sets up to see if you qualify. The second stage is more complicated and takes time so the first stage simply saves everyone time because if you don’t meet the immediate requirements, the formal application never takes place.
New builds take time
Now if you want to buy an established home, the time taken by the lender to assess the property is relatively short. But you want to build a new home and currently there is no home. So the lender makes their assessment of your formal loan application on the basis of the plans, the drawings for your new home. This takes time and so to help your case, don’t make your application until you have all the material which the lender can use to assess your application.
So many people get discouraged when they make application and the lender says, “Where are the plans for the garage?” or “Where is the information about council approval?” More time ticks by. If you want the project approved as soon as possible, follow all the rules and guidelines and don’t cut corners.
This is where working with your builder and/or architect in the first place is so important. It’s a chicken and egg situation. Without the details, the plans and details for your new home, the lender won’t consider giving you any money. You obviously can’t go ahead with the build unless you raise the finance so there comes a time where you have to spend some money to obtain the plans and hope that they convince the lender to stump up the cash. Again, working with a building and fitting consultant, a broker or an experienced and successful builder may save you time and money in the long run.
If you are paying rent waiting for your new home to be built, the sooner it is built the sooner you stop paying rent. Do yourself a favour and prepare well.