Interviewing Dann Mulder, Lake Michigan Credit Union, how to buy a new construction home in Grand Rapids
Hi, this is Doug Hansen and the name of this video is “How To Buy A New Construction Home in Grand Rapids.”
My name is Doug Hansen and I work with Five Star Real Estate. I’ve been in business for 26 some odd years. So, I got a pretty good idea how to look for and negotiate a new home, new home constructions. I’ve got Dann Mulder here with Lake Michigan Credit Union.
So, Dann, tell me a little bit about yourself. Thanks for having me, Doug. I’ve been in lending for 30 years. I had been with Lake Michigan Credit Union now for about five years and I’m use to all the major programs including construction loans.
Okay. Again, the name of this video is going to be “How To Buy A New Construction Home in Grand Rapids.” So, Dan, tell me, how do you get a loan on a new construction home? Well, basically the process is similar to just a regular purchase.
You start out with what are the person’s qualifications? Do they have good income? Good credit? Good debt to income ratios? Okay, then the process is getting them connected with the builder, which, you can help them with and then the process is getting their plans and specifications put together with the builder and we work through the loan process with them.
Okay. Sounds good. Tell me the difference between a construction loan and an end loan and an end loan to me is something that the builder will take out all the money to build a house and then you just get the loan to pay off the builder. Is that correct? Or is there something a little bit more goes into it? No, that’s correct.
There’s a couple of different ways to go about it. There are some lenders that will do a construction loan and then do an end loan. There are those that like say if the builder is willing to, to carry the financing and build it, then all you need is the end loan. And that’s not a whole lot different than just going out and purchasing a house.
The construction loan is a little bit different in that, we put all the processes in place and we have a number of different pieces that we work with the builder on in order to put that together. And then we walked through a step by step as the construction is going on. As they do the excavating for the foundation, do the rough lumber and plumbing and mechanicals and such, all the finish work and step by step, we do draws with builder. And for the people that are looking to do a construction loan, you simply, only have to pay for the amount that’s drawn each time.
So you’re only paying interest on that amount through the process. And then once the loan is complete, once the construction is complete, then it rolls over automatically into a 30 year fixed loan. It makes it a lot easier. Then it makes it a lot easier. And what’s nice about that is you don’t know what interest rates are going to be nine months from now. And so you’re locking into an interest rate now and you’ll have that interest rate.
So, you don’t have to worry about fluctuations and interest rate are rising interest rates, and what they might be in the future. You’re locked in now and, you’re good to go. Quick, quick question for you on the end or the, uh, draw you said it was interest is that interest only? Interest only, so when you’re doing, and your initial draw might be for $40,000 for the excavating and the pouring the foundation and such.
You’re paying interest only on $40,000 then the builder draws for rough lumber and rough plumbing and all those sorts of things. And maybe you’ve got another $40,000 draw, now you have $80,000 and you’re paying interest only on $80,000. So you might have a $250,000 construction loan, but you’re not paying interest on that. Only the amount that’s drawn as it’s gone each time, each time. Very good. Okay. This is our first video.
Our next video is going to be what does Lake Michigan Credit Union need from a builder to actually start construction? This is Doug Hansen and Dann Mulder and we’ll see you on the next video. Thanks.
Doug Hansen Dann Mulder
Five Star Real Estate Lake Michigan Credit Union
www.DougHansenRealEstate.com START A NEW LOAN APPLICATION