How long can I be in the construction phase?

Shared by Ed Currie of Associated Bank

The construction phase is the period of time your home is under construction. Once your home is complete, the loan moves to the permanent phase with payments of principal and interest.

Every construction phase is initially setup for 12 months. If you use less time, the loan will move to the permanent phase once your home is done. So you can’t ride out an interest only payment for the full 12-month period. Once it’s complete, the payment changes from interest only to principal and interest. If more time is needed, a one-time extension of up to 6 months can be obtained if requested at no charge.

Home Building NAIHBR couple with contract
Ed Currie Associated Bank

Ed Currie

Associated Bank

Meet the Author ...

Ed Currie

Ed Currie began assisting clients with mortgage financing in 1994 during one of the slowest mortgage markets in the last 25 years. The slow market allowed Ed to develop his client-centric philosophy and drive to make the process as stress-free as possible. Since that time, Ed has assisted over 5000 clients with total loan production exceeding $1 Billion.

Habitat for Humanity DuPage County joins forces with NAIHBR

DuPage Habitat for Humanity now working with NAIHBR to help communities.

Habitat for Humanity DuPage

Two of NAIHBR’s core values are investing in the development of communities and giving back, especially to assist those that have worked hard to achieve the dream of home ownership. No organization embodies this mission more than Habitat for Humanity. Their goals of financial education, homeowner preparedness, assistance to those in need of housing, and community development are aligned with NAIHBR’s core values of how to “do good” in a community.

Our new partnership between NAIHBR and DuPage Habitat for Humanity has 3 key aspects, all based on identifying what being a “Good NAIHBR” is all about. They are:
  • Working together to recycle and reuse as much material as possible prior to the demolition of a current home. It is amazing what can be reused or recycled instead of simply going into a landfill. Our new partnership will reduce waste, and drive us towards more sustainable home renovation.
  • NAIHBR is committed to the financial assistance of Habitat to better support its mission. To that point, NAIHBR has committed to make a financial donation directly to Habitat for Humanity, for every transaction that goes through the NAIHBR service network. We are also asking our builder partners to match our donation on a local level, to an assistance program with similar goals. In DuPage County, for example, a builder would make a matching donation to H.O.M.E DuPage.
  • Programs and financial donations are all beneficial, but there is no substitution for personal time. Promoting volunteerism is a key aspect to the NAIHBR-Habitat partnership, and NAIHBR will regularly be informing our membership about Habitat volunteer opportunities in their local communities and how to become a part of them.

Together, we can all rebuild and rejuvenate our communities and create an impact that will benefit our neighborhoods and the families that live there for generations to come. Habitat for Humanity – Welcome to the NAIHBR family!

What happens to a construction loan once a home is built?

Shared by Ed Currie of Associated Bank

The only change in the loan after your home is complete is the payment. During construction it is interest only based on balance owed and after construction it changes to principal and interest. The actual P&I payment will be determined by the final balance of the construction loan and the remaining term of the loan.

This change occurs after you take your final draw and the inspection confirms your project is complete per the plans and specs. It will then generally be 30-45 days when the change occurs.

Concorde Normandy
Ed Currie Associated Bank

Ed Currie

Associated Bank

Meet the Author ...

Ed Currie

Ed Currie began assisting clients with mortgage financing in 1994 during one of the slowest mortgage markets in the last 25 years. The slow market allowed Ed to develop his client-centric philosophy and drive to make the process as stress-free as possible. Since that time, Ed has assisted over 5000 clients with total loan production exceeding $1 Billion.

An Unprecedented Time, an Unprecedented Opportunity in the Real Estate Market

by Jim Pesavento, Director at NAIHBR

The American real estate market is facing major changes as it rolls into the second half of 2017. Consumers, their preferences, and the property inventory to satisfy market need are all changing faster than ever before, all culminating in a unique market opportunity not seen in over 20 years.

Millennials will make up 33% of homebuyers in 2017. This number is rising every day, and soon a majority of home sales will be to this new generation of buyers. This group of buyers is well educated, savvy, and resourceful. Their preferences in real estate generally lie in either new construction, or a property that has been recently renovated. Unfortunately, the condition of the majority of housing stock is not at this post-renovated level and therefore not an ideal option for these buyers.

Despite utilization of the internet for the purposes of home shopping and research, more buyers than ever before are using the services of a real estate professional (Marketwatch, March, 2017). Statistically, 85% of young boomers, 87% of generation X buyers and 89% of millennials used the services of a real estate agent in 2016. So, despite the technological advances, the trend is toward using Realtors more in the future, not less.

NAIHBR National Association of Independent Home Owners and Remodelers0

Builders broke ground on 784,000 single-family homes in 2016. Forecasts indicate an increase of 9-10 % in 2017, as well as 2018. A normal level of new home construction production would satisfy the market need, sustain population growth and replace older and obsolete homes. This number of needed new homes is estimated to be 1.3 million per year, and we are currently building at only 60% of that number. There is clearly a new housing shortage, and it is pacing to get worse long before it gets better. This is compounded by the fact that smaller builders cannot keep up with the demand, as speculative construction is capital intensive.

  • The National Association of Independent Home Builders and Remodelers understands the unique opportunity that these various elements create.
  • There is a new housing shortfall.
  • A majority of homebuyers would prefer a new or renovated home.
  • More buyers are using buying agents now than ever before
  • Builders need to find a scalable solution to meet the market demands, as smaller builders have their productivity gridlocked by speculative construction, which ties up critical operating capital

Much like these unique conditions create an unprecedented opportunity for the players in this space, NAIHBR offers the platform to bring the builders, agents and vendors together to create a synergistic relationship that can meet market demand and greatly benefit those that participate along the way. It is our pleasure to take this journey with you, and we welcome you to the NAIHBR family.

James Pesavento

Jim Pesavento

National Association of Independent Home Builders and Remodelers

Meet the Author ...

Jim Pesavento

Jim has spent over two decades in the real estate business as a builder, Realtor and as a mortgage broker. Jim brings a wealth of knowledge to NAIHBR. He lives in Illinois with his wife and 2 children.

NAIHBR in the National Press

NAIHBR recently made the national news in a press release on Yahoo Finance.

National Association of Independent Home Builders and Remodelers

The National Association of Independent Home Builders and Remodelers (NAIHBR) made national press with an announcement by National MI of their sponsorship of NAIHBR's Chicago Leadership events. The announcement was picked up by several national news channels including Yahoo Finance. NAIHBR's Chicago area events are scheduled for August 29th and 30th at the Regency Tower in Oak Brook Il and 401 N. Michigan Ave. in Downtown Chicago respectively.  The events are Realtor partner focused with speaking sessions focused on ways Realtors can leverage new contruction and renovation programs throuh NAIHBR and it's financial parnters to grow their businesses and improve local communities. For additional information on the leadership events and registration, please visit the NAIHBR events page.

What does a typical timeline look like on a construction loan?

Shared by Ed Currie of Associated Bank - Initial content published March 2016

Everyone’s timeline will be different. Putting the appraisal aside, it generally will take a week or two to get the loan approved. The approval of the loan will work concurrently with the appraisal process.

The single biggest item that impacts how long it takes to close on your construction loan is when adequate plans and a budget are available. Because the construction loan appraisal is based on the plans and specs of the project, the appraiser cannot begin until those are available. You want to give yourself 30 days from when the plans and budget are available to order the appraisal before you close your loan.

Home Building NAIHBR couple with contract

The things that will have the biggest impact on how long it takes to close your construction are:

  • How long will it take to get all of the supporting items we need from you.
  • How long before the plans and budget are done so we can order the appraisal
  • How long will we sit in underwriting queue for approval
  • How long will the appraisal take
  • Will we have a tough time document ting something the underwriter needs
  • Will we have any appraisal delays or issues
  • The dreaded “unexpected”

Issues above aside, if everything goes as planned and we are able to order the appraisal right away or early in the process, the typical start to close time frame can be 30-60 days. If we are able to get all we need from the client right away and order the appraisal we’ll be closer to the 30 day time frame. If it takes a while to get items from the client and the appraisal can’t be ordered for a while, it will be closer to 60 days or longer. We’ve had a few clients that have taken a year to close due to delays in plans and changes in builders and budgets.

Ed Currie Associated Bank

Ed Currie

Associated Bank

Meet the Author ...

Ed Currie

Ed Currie began assisting clients with mortgage financing in 1994 during one of the slowest mortgage markets in the last 25 years. The slow market allowed Ed to develop his client-centric philosophy and drive to make the process as stress-free as possible. Since that time, Ed has assisted over 5000 clients with total loan production exceeding $1 Billion.

Why is selling a lot or teardown listing so difficult?

With interest rates near all-time lows, and home sales on the rise, one would think buyers would be snatching up lots and teardown properties left and right. But they are not. Why?

Vacant Land for sale

The realty is many buyers want to build new homes, but hesitate because they know nothing about the building process and it seems intimidating. Once they buy the lot or tear down where do they go from there? How do they find an architect, a builder, get permits, estimate costs, etc? The whole process can be overwhelming and it can discourage them from pulling the trigger.

In addition, the visualization a buyer has when looking at existing properties is not there to create an emotional attachment. In other words, buyers find it difficult to picture their new home complete on the lot. Logic says buy the lot, but the emotional appeal that actually brings them to action is missing and we all know that purchasing a home is a very emotional process for most buyers.

Whether you have a vacant lot listing or a teardown, the challenges can be great and the compensation low. NAIHBR can change that by providing two new marketing programs that get you more exposure and increase your commission amounts.

Whether you have a vacant lot listing or a teardown, the challenges can be great and the compensation low. NAIHBR can change that through its partnership with Proposed Properties by providing two new marketing programs that get you more exposure and increase your commission amounts.

Let's face it, real estate is a numbers and timing game. We need to find the right person at the right time who is interested, motivated and financially capable to get a deal done. Naturally the more offers we have in the market, the more opportunity we have to find that person.

That is exactly what Proposed Properties does when partnering with real estate professionals. We provide a second or even multiple options to market lots, tear downs or renovation candidates.

  • Proposed Properties helps you match lot and teardown listings with models that will compete in your market.
  • Proposed Properties helps you with communication between your buyer and the builders or renovation companies.
  • Most importantly, Proposed Properties helps you get paid

A Great Time to Rebuild Our Communities

A message from the Chairman

NAIHBR National Association of Independent Home Owners and Remodelers

As we launched our National Association of Independent Home Builders and Remodelers, also known as NAIHBR, each one of the founders had a reason to work together building a national platform that creates opportunities for builders, mortgage lenders, suppliers, and realtors to work together for the betterment of local economies. Homeownership has proven over time to be a powerful force for creating family stability and wealth over time.

Many of us grew up when the US population was under 200M in the ancient 1970s , and today it stands at 325M strong. We haven’t added any new states, but have added the need for more housing. We should reach 1.2M new new housing starts in 2017; but did you know this is less than half of the pre-housing crisis in the mid-2000s? The good news is new construction is on the rise fueled by consumer demand, low interest rates, and an aging housing stock. There are certainly tailwind behind the Construction / Renovation movement.

The economic value of home ownership has proven itself over the test of time. One of our Directors, Mike Wolson is with Baird and Warner, which was formed in 1855. Imagine back then, a new home was $1400! Now a new home averages almost $280 thousand.

We have seen home prices appreciate consistently through decades. Over the life cycle of a family’s time in a home, typically it has the potential to triple in value over 30 years while the mortgage typically finds its way down to zero. This means the value of homes can create a sizable asset that can be used for retirement, especially when the children are grown and out of the home.

When we read that the homeownership in the US is reaching 50-year lows, we all become disheartened that the long road to the “American Dream” has been challenged. We can either accept the rate will continue to fall or proactively work together on a better solution.

As new construction is almost one in six transactions, and the fact that there is $350B of renovation spend per year, we already have momentum on our side. As an industry we have the foundation with all the key players to address the housing shortage and lack of equity appreciation in many local markets (still over 3M underwater mortgages linger).

NAIHBR believes if lenders, realtors, builders, and industry leaders work together on creating a more efficient approach to serve the consumer, new construction and renovation will accelerate. Our hypothesis was tested in launching the organization in the Illinois market. Within 3 months of starting, we recruited 1000 members and recruited lender sponsors, builders, and built a leadership event with esteemed speakers such as Fannie Mae, Freddie Mac, National MI, and realty brokers.

At the end of the day, we understand the members of NAIHBR chose real estate as their profession that results in families creating stability and wealth accumulation over time. If we take the approach of advancing local solutions, we can get to a national approach to addressing our housing shortage and meet the needs of families for generations to come.

By doing good, we can all do well.

We look forward to working with each and everyone of you restoring economic strength in our communities. We look forward to sharing with you the many initiatives underway in the weeks to come.

Paul Imura

NAIHBR Chairman

More Evidence that the New Home Construction Market is Growing

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The market for new home construction continues to grow.  Brad Finkelstein of National Mortgage News reported more economic evidence of a growing new home construction market in a March 14th article “New home mortgage apps signal strong market for homebuilding”.

According to Finkelstein’s article, February new construction loan applications grew 2.2% from a year ago and that Februrary’s volume was up 16% from the previous month.  That is great news for independent home builders as the existing inventory of home for sale to be constrained.

 

NAIHBR

NAIHBR

 

Inventory constraints are also driving interest in home additions and renovation opportunities according to a February 2017 survey of NAIHBR members.

New construction financing not catching up with housing market

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In a short slide presentation, National Mortgage News recently published a  list of items constraining new construction financing (a reference link to the article is included below).  The six major factors included

  1. rising land cost due to market appreciation
  2. new construction credit remains difficult to obtain with most lenders
  3. shortage of qualified labor
  4. pressure from the rental market
  5. younger buyers are waiting longer
  6. Limited credit facilities are still hindering the market
New Constructoin

New Construction

NAIHBR members in a February 2017 survey reported findings consistent with some of the studies findings. Land lot prices and teardown opportunities have increased significantly over the last 12 months where many buyers who remained on the sidelines have now been priced out of the market.

Additionally, many builders named a lack of qualified sub-contractors as a current challenge to their business.  Since the housing crash, many skilled tradesmen were forced into other lines of work, leaving an demand gap for builders and renovating GCs.  Although market demand should eventually bring additional labor, for now labor costs for skilled trades is rising significantly.

 

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