SilverBeam Homes Blog

Financing for Pre-Sale Homes 

by Bevony on March 1, 2022 No comments

All home loans are definitely not the same. Here’s how you can tell the difference between a good and a bad fit. 

The region is still seeing a strong demand for real estate, and with listings highly priced, many are turning to the new construction market to meet their home ownership needs. Most Condos and Townhomes are sold pre-sale. That means they are sold even before construction starts, or sometimes while construction is ongoing. This is referred to as a presale purchase. 

Your reason for presale doesn’t matter too much. There are some critical elements that can help you enhance your experience when purchasing presale. This is very true, especially when you consider your options for mortgage financing. You won’t find comprehensive financing solutions. So you have to ask all the right questions. The main thing is that you want your mortgage approval to still be valid when the construction is all done. Here are some things to consider when purchasing presale. 

What is the Lender Offering?

You can get one of two options. There is the condition free and final mortgage approval offer, and there is the mortgage pre-approval for purchasing the presale home. There are conditions that come with pre-approval offers, which allow the financing to be reviewed later, so there is the chance that the terms can change. With a final mortgage approval offer, you get peace of mind knowing there will be no changes in the terms of the offer when your construction is finished. 

Validity Length of Mortgage Approval 

The best scenario is to choose a lender that offers a final mortgage that is equal to the length of construction. The best scenario is for the final mortgage to be valid for greater than the length of construction. 

You want to know what happens if there is a delay in construction. Will your lender require you to undergo another requalification, or will they honor the original approval? 

We find that most lenders can only guarantee mortgage rates for up to four months. But there are those that specialize in presale construction financing. These will allow 36 months and beyond, giving you even more peace of mind. 

Review or Requalification 

Not all lenders will offer you unconditional mortgage approval for the long term. They will often ask for updated information, even if they don’t do an actual requalification. They may simply ask for updated income verification or may retrieve an up-to-date credit report. If you can, choose a lender that will not try to requalify you and will keep the initial commitment. 

Additional Benefits

Some lenders offer disability, life and critical illness coverage. If you can get this type of coverage, it is highly recommended, since anything can happen with you and your family as you wait on the completion of your new home. 

If you are considering presale construction, it is important to note that mortgage financing options are different for this market. When selecting your lender, review the above information and make an informed decision. Close on a new home without any unpleasant surprises, by being harmed with the right knowledge from the get go. 

Purchasing a pre sale property can be a great experience, whether you are purchasing for yourself, for a child or as income property. Start off by seeking the advice of a mortgage specialist. 

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BevonyFinancing for Pre-Sale Homes 

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