when you build a house, do you close on it and start paying the mortgage before it is completed?

Question

this is a dumb question, but i've never bought a brandnew house before.

Answer 1

Generally no. Most of the time the mortgage lender is going to want to see the completion certificate, signed by the contractor and the buyer. Many want to see the completed punch list from the walkthrough inspection as well and some will even want to do their own inspection.

Answer 2

A lot depends on who owns the lot. If the builder owns the lot, he will most likely have a construction loan already in place and you are required to put down a reasonable amount of deposit. At completion of the construction, you will close on your mortgage loan and take possession of the house. You probably should have a 10% hold back through the bank pending on the completion of the punch list. This represents the profit the builder has on the house and he will have to come back and finish all the little details before he can take off.

If you own the lot out right, you most likely has to do a construction loan with several draw schedules at different stages of construction so the subcontractors can be paid. At the end, when everything is completed, you will convert the construction loan into a regular mortgage. The same bank should be able to do this all together. In either case, may sure you have some kind of a hold back and make sure all the construction lien releases from the subcontractors are signed. This will ensure the general contractor does not run off with all the money and leaves the subcontractors unpaid.

Answer 3

If you are building the house, you would get a construction loan to cover costs during the building process and then once a certificate of occupancy was granted by the city, you would convert it to a regular mortgage.

If you are buying through a builder, you would most likely make a deposit on the home and then get a mortgage on the home at the time you took possession of it (close of escrow).

//Rick

http://www.paccrestinspections.com/nhc_index.htm

Answer 4

No, not really. Most builders take out a loan for the job, build the house, have a walk thru with buyer to explain all the mechanicals and operations of the home, then you close and then the mortgage payments begin.

Answer 5

I've had two homes built (previous marriage) and we did not close until the home was finished & we had our final walk through.