Comparing Custom Home Construction Mortgage Companies in Houston Metro area
When looking for a home construction loan company in the Woodlands Texas, or in any area for that matter it’s best to look for a company that has you and your family’s interest in mind
With all of the construction going on in The Woodlands many lenders have started offering Custom Home Construction loans in the Houston Metro area who lack any experience in doing them and as a result the homeowner that is building their dream home is taken to the cleaners and the whole process ends up being a nightmare! The Tragic thing is that while price gouging is not illegal regarding home construction loans it is unethical at the very least. Many unsuspecting first time custom home builders operate on the assumption that construction loans are just like regular mortgages. This is what the unscrupulous lenders are hoping for and they use this against you the borrower.
Chart of Closing Costs with Houston Area Custom Home Construction Lenders
A recent survey of custom home construction lenders in the Houston area revealed something startling that there is not just a little difference but a HUGE Difference in costs and down payment requirements between them.
This information was last updated July 21st
Construction Home Financing Costs Comparison in The Woodlands Texas
|Center Home Financial Fees||Woodlands Mortgage One-time Close Fees||Woodlands 2nd Close Option if needed||Constructors Plus||Third Financial||Construction Loans Financial|
|Total Cash Needed||$105,505||$52,150||$3,350||$107,640||$88,825||$82,645
|Construction Admin Fee||$1,645||$1,500||$2,050||$2,160||$1,200|
|Construction Title Fees||$3,500||$3,500||$3,500||$3,500||$3,500|
|2nd Close Fees||0|
|2nd Close Title||$1,500||0||$1,500||$1,500||$1,500||$1,500|
|% difference||100% Higher||$102% higher||63% higher||60% higher|
When Many People Ask me why do some lenders do One-time Close and others two-time Close Construction Loans what do I tell them?
The answer is simple, Money. How else can you explain why fees between one lender and another are double and in some cases triple what they should be! Many Lenders only offer two-time closes and in an effort to suck as many fees out of a borrower they charge two sets of fees. Well enough of the editorializing. Let’s define a one-time and a two-time Custom Home Construction loan.
What is a One-Time Close Construction Loan ?
A One-Time Close construction loan is when both your construction and permanent loan are done at the same time. You have one set of closing costs and you rate is fixed for the construction AND the permanent loan. You only have to go through Underwriting once and produce financials once. You pay interest only on what you’ve borrowed up to that time during construction. When Construction is complete your loan is modified and you begin paying the normal principal and interest payment
What is a Two-time Close Construction Loan ?
A two time construction loan is when you only your construction loan is done. You pay a set of closing costs for the construction loan and your rate is fixed until you finish your home. You have to produce your financial data and go through underwriting. Once approved you pay interest only on the amount you’ve borrowed up to that time
THEN when you are about 30-days from finishing your home you have to apply for a loan again to pay off your construction loan. Pay another set of closing costs, produce your financial history again and go through underwriting again. Only then can you lock your rate for your permanent loan. In this environment of increasing interest rates you may end up not being able to afford your permanent loan because the payment was higher than when you started construction and had your initial pre-approval for the permanent or take-out loan.
Are One-time Construction Loans the Best for your Custom home Construction project?
As you can see from the chart above the costs of a two time close are substantially higher than a one-time close in many cases. However, as mentioned earlier a one-time close may not be in the best interest of you the borrower.
The Got’cha that most Home Construction Lenders don’t tell you
In some cases lenders when getting the process underway do not tell a borrower that the
loan they just received to build their house that they will have to pay off the loan at the end of construction. You always want to be clear if your One-time close is truly a one-time close. Unscrupulous and Unethical lenders legally pull a fast one on people building their own custom homes in the Houston area daily.
So you’ve done your research and you want to custom build your dream home where do you start?
For a list of areas that Custom Home Construction Loans are provided in South East Texas Click over to our Houston Area Construction Loan page to see if these custom home construction loans are available for your area.
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