construction/permanent loan

[M]

I've been looking for a new manufactured home to put on my land and plan to do the land home package. I'm going thru a mortgage broker. Is that a good idea? Why must it start out as a construction loan? Is the construction loan and the final loan financed by the same institution? Would the interest rate be the same for both? How long does the process take ?

[Kurt]

I am going through the same process right now. My construction loan must be paid within 6 months of closing. The bank I am going through does not carry mortgages so they will help me find a lender for the end loan. The interest rate for the construction loan is not the same as the end loan. It takes 8 weeks to get my house built and probably a week or so to get it all set up. After final inspection, I will apply for the end loan.In the meantime, the pit will be dug and the foundation strips poured. All utilities will be also routed to the house location. good luck!

[rmurray]

Actually this is a two step process...Some mortgage companies offer 1 time close consrtuction loans...some do not..

1 time close construction loans are offered by some final lenders..the process is to get a formal loan approval...close..construct (they pay in stages) and then convert to permanent loan...all at the same interest rate and with only 1 closing..so no extra closing costs..no extra commission for the broker..
Other plans are...get final permanent finance approval...then a construction loan company commits to close..usually a 6 month loan...high interest rates...large closing costs..extra commission for the broker...after final construction and inspection the permanent finace closes at the then current interest rate...

By far the best construction loan is a 1 time close loan...permaent loan rates are locked in for the whole construction process and costs are very low....No risks of rising permanent loan rates...

2 time closes are very expensive...usually a total cost of about 5 to 8% of the total package...even if the home is built very quickly (8 or less weeks)...

The other poster mentions a construction loan...then applying for a permanent loan...this migh be ok if your credit is VERY good and you job VERY stable...If not..it is very possible that the permanent loan might not be avaiable or rates may be higher and you no longer qualify for the home..

If your credit is good...you should skip the broker and go directly to the mortgage company and skip the middle man..saves you fees in the long run..

Since the mortgage business for manufactured homes is in some flux right now..be sure to get advice from your dealer as well...He will be aware of all oportunities in your state for you and might know of some that might save some money or time for you..

[M]

The dealer is the broker.

[rmurray]

I would shop around with other brokers...and directly with mortgage companies...your dealer obviuosly is into make profit fro the finance...which is ok..if he is competitive with all others lenders...

[M]

What kind of fees are asscociated with a mortgage broker? Are they a set figure or is it a percentage of the loan?

[rmurray]

Fees can vary widely from broker to broker....lender to lender...

Usually the lowest fees are directly with mortgage lenders...Most often about 1% origination fee...plus about $350 processing fee..

I have seen brokers trying to make as much as 10% or more (they have all different names for their fees...origination fee..discount fees..broker fees..processing fee..mailing fees...aquisision fee..the list goes on..some have them all)..caution and shopping is necessary...Ga and a few other states have passed preditory lending laws capping fees here at 8%...Still very high if credit is good..

Also...brokers can raise the rate of the loan for a hidden kick back from the lender of as much as 3 or 4%...So you must shop both fees and rates..

I have seen folks shop all over the countryside to save a thousand or two on the house...then fall for financing that was 30 to 50 thousand more over the life of the loan..Remember for every 1% in interest rate..the over all interest will be about $24,000...So..saving only 1/4% will save $ 6000...Good Luck

[M]

I'm in GA...thanks for the advise.