Construction Loans in St. Louis, MO
By Ryan Cox - Senior Renovation Loan Specialist
If you are considering building your dream home instead of buying an existing home on the market, it could surprise you to learn that you will not be getting a traditional mortgage. Alternatively, you’ll likely be getting a construction loan. For your benefit, I have put together some information to help you learn what construction loans are, how they work, as well as the pros and cons of using them to finance your dream home.
What are Construction Loans?
Construction Loans are higher-interest, shorter-term loans that are used to cover the cost of building or rehabilitating your home. Unlike a traditional home loan, which is based on the fair market value of the home and determined by the home’s condition in comparison to other recent sales, construction loans are based on what the projected value of the home will be once the work has been completed.
There are a few different types of construction loans that you can choose from:
- Construction-to-permanent loans: These loans work well if you have definite construction plans and all your timelines in place. In this case, the bank will pay the builder as the work is being completed. Then, that cost will be converted to a mortgage at closing. This type of loan will allow you to lock in your interest rate at closing.
- Construction-only loans: A construction-only loan must be paid off in full once the building process has been completed. This could be a good choice if you have a large sum of money to work with, or you are confident that the proceeds from the sale of your current home will cover the cost of the new build. In this case, if you need a mortgage to cover the cost, you will have to search for the lender yourself and also be approved another time.
- Renovation loans: These types of loans can be used if you are considering buying a fixer-upper or a property that needs a lot of work. In this case, there are several different products that can be used to incorporate the projected costs for all renovations you plan on doing to the property, along with the purchase price, then everything is wrapped up in a mortgage. There will be one loan, one closing & one payment.
How construction loans work
Traditional loans are paid out by a mortgage company to cover the cost of the home in one lump-sum at closing. With a construction loan, payments are made in installments. A bank will pay the builder as different phases of the building process have been completed. The total cost is transferred to you once the entire project has been completed. These installments are called draws. Each draw will reimburse the builder for the costs needed to cover that phase of construction. Before each draw can be made, the bank will do an inspection to verify the estimated cost of that phase and to make sure all of the work listed has been completed. Since the financing of a construction loan has many variables, it is crucial to work with a good builder. You will want someone that is experienced in budgeting, scheduling and has the ability to work well with everyone involved in the process.
What are some benefits of a construction loan?
- They are interest-only during construction: Since the loan isn’t paid out in full until all of the construction is complete, the bank doesn’t ask you to start paying down the principal until then either. During construction, you will only be expected to pay lower, interest-only payments on the loan, which will give you more time to save.
- They have flexible terms: Though you will need to provide the bank with specific plans for your project, construction loans offer more flexibility in regards to loan terms and guidelines than traditional loans do.
- The added scrutiny provides structure: Though added scrutiny may not seem like a good thing at first, during the building process, it can actually help ensure that your project stays on budget and schedule.
What are some disadvantages of a construction loan?
- They are sometimes harder to qualify for: Since construction loans are flexible, they often come with higher qualifying standards in terms of credit and down payment. Typically, you will need a score of at least 680 and a down payment of at least 20%.
- They have higher interest rates: Construction loans usually have variable interest rates that correspond to a certain percentage over the prime rate or the rate that the bank is offering. Example: if the prime rate is 4.5% and the loan rate is prime plus 2%, you would pay 6.5%.
- Shorter-term loans can be risky: Especially if you are going for the construction-only loan. At the end of the construction phase, you will need to be able to pay off the loan in full. Even If your original financing falls through, you will still be obligated to pay off this loan.
For more information or questions about how Construction loans or Renovation loans could help you accomplish your future goals, please contact me, Ryan Cox, Senior Renovation Specialist with First Integrity Mortgage Services, NMLS# 1547172 at (618) 581-3015 or email email@example.com I look forward to helping you achieve your dreams!
Mortgages and Home Loans for Investment Properties in St. Louis
By: Jeremy Durham
Many people realize the importance of investing, or more so, having a diverse portfolio of investments to protect against unexpected unfavorable market conditions. While many rely solely on 401k’s, IRA’s, mutual funds, etc., another option to expand the reach of your investment portfolio is through Investment Properties. I speak with many potential clients that have a tremendous interest in getting into this line of investing but need guidance and answers to their questions. That’s why I’m here! Let’s begin by discussing the types of available financing for your investment needs.
- Conventional Lending – This is historically the most common method of financing for individuals interested in Turn Key Ready, Long Term Investments. Fannie Mae and Freddie Mac offer 30-year loans at competitive rates (since these are somewhat risky, income-generating properties, rates will be slightly higher than what one would expect on a personal home) and will allow you to finance up to 10 properties through conventional lending means. Down payments are required and depend on the number of units (1-4) and the number of properties you currently have financed.
- Investor Solution programs – These programs are slightly less common than conventional lending, but are very useful for the existing investor who has a very good accountant and writes off much of their earnings from their investment properties, and/or have somewhat lower credit standards than conventional programs, and/or allow for shorter terms out of bankruptcy, and/or no limit on number of properties financed, and allow for much higher loan limits than a conventional program limit of $484,350. These options also are Non-Income Qualifying as they are based on the Cash Flow of the property. This is huge for the investor that wants to build a portfolio of properties!
- “Fix & Flip” Options – These options are also referred to as Hard Money Lending. They allow for funds to purchase AND renovate the subject property all in one transaction. Down payments vary and are influenced by the number of properties that you have “flipped” in the past and your level of experience (and be prepared to prove it). Many investors also don’t wish to be involved in a longer-term loan (6 months or longer) as they want to renovate and sell. This program allows for that.
- Cross Collateralizing – You might be thinking, “I have been doing this for ten years, and I’m sick of having 8-10 loans for all of my properties.” That is why cross-collateralization options exist. When you have a significant number of properties, you can roll all of your properties into one loan and enjoy the combined and considerable equity from your combined properties. While First Integrity Mortgage does not offer This lending option yet, I can recommend one of our professional partner banks or credit unions who DO offer this lending option!
My name is Jeremy Durham, Sr. Mortgage Banker with First Integrity Mortgage Services in St. Louis, MO, and I would love to speak with you regarding your needs or questions about your options with investment properties! My contact information is firstname.lastname@example.org or 314-856-5626, NMLS# 989777.
Refinancing in St. Louis, MO
Here a Refinance, There a Refinance, Everywhere a Refinance!
By Tim Whitmire
Mortgage interest rates have come down to near all-time lows and home values have seen strong appreciation over the last few years. As a result, great opportunity exists, RIGHT NOW for many homeowners. Improving my client's financial position through refinancing has been part of what has made me a successful mortgage professional for closing in on 20 years. Here are the top three things to think about when it comes to refinancing your home loan.
Why Should I Refinance?
Depending on your short and long term goals, refinancing can help you lower your monthly payment, remove PMI (private mortgage insurance), reduce the term of your mortgage, build wealth quicker, finance improvements to your home, or consolidate other debt you may have. If you have a $200,000 mortgage and lower your rate by .5% you would save approximately $1,000 in interest the first year. This can be used to increase your cash flow by lowering your monthly payment, or you can apply this $1,000 in savings towards your monthly payments to build equity and pay off your mortgage quicker.
Eliminating PMI can have the same impact. If you’ve owned your home a few years, you’ve paid your mortgage down a bit, in most cases, the value of your home would have increased, and you may have the equity needed to remove/eliminate PMI. Just like lowering your rate, these savings can be used to lower your monthly payment or be applied towards your mortgage each month to pay your home off more quickly.
Financing expensive home improvements can be difficult and saving money for the improvements can be even harder. Refinancing can be an easier and more affordable way to finance home improvements. Our special renovation mortgage program allows you to borrow up to 95% of your “as completed” future value of your home. For example; if the current value of your home is $200,000 and the value of your home after improvements will be $300,000, you can borrow up to $285,000 to finance home improvements.
When Should I Refinance?
You should refinance when the opportunity to save money or accomplish your goals presents itself. A year ago almost everyone believed rates were headed up, instead rates have dropped. This is a special opportunity to refinance and save money that hasn’t existed for a few some time now. If you are considering refinancing solely to save money by lowering your rate or removing PMI it’s important to have enough savings to recoup any closing costs you pay within a few years.
How should I Refinance?
At First Integrity Mortgage Services we offer no-cost mortgage check-ups. To make it happen, all we need is a copy of a recent mortgage statement. This allows us to compare what you currently have vs. what you possibly can take advantage of right now! We analyze your opportunity to save and present to you all of your refinancing options with no obligation or cost involved. We will let you know if it’s worthwhile refinancing or not. We make it very easy and we will only allow you to refinance if there is a true benefit to you!
First Time Home Buyer Tips in St. Louis, MO
By: Jeremy Durham
Buying your first home can be quite daunting. Any first time experience can make one nervous. Couple that with the need to share your personal financial information, take on a significant monthly expense that you may have never budgeted for previously, and making decisions on factors that you have never heard of before, this can be overwhelming for many. I hope in this article, I can share an overview of the vital components of your potential mortgage loan and offer some piece of mind. Let’s get right to it!
This is a vital document included in your home purchase, but what is it? An appraisal inspection is performed by a certified and licensed real-estate appraiser. The appraiser will most likely spend several hours researching the home. They will inspect for public information and recent comparable homes in the immediate area, as well as, personally visiting the home for a visual inspection, take photos, check for safety or damaged items in the home, etc. They will then compile their multi-page report and determine a fair market value for your home. This monetary value determination ensures that the home is actually worth what you have agreed to pay for it, and protects the lender offering you a loan that the collateral (the house) is worth what they are lending.
Your personal credit history is a huge part of being able to qualify for a home loan. Many of us already believe that we have a great credit score, so we must be able to buy any home we wish. On the other hand, some of us think, perhaps we may have credit issues that may not allow us to purchase a home. Well, it is more complicated than that. You may have some credit blemishes, but there are a variety of loan program options that might be able to accommodate you, even with certain blemishes. On the flip side, a great credit score doesn’t automatically mean you will be able to qualify for any home you wish.
-Funds for Down Payment and Closing Costs
This topic is the cause for many last minute issues in a real-estate transaction that leaves a buyer asking "Why?" There are numerous, complicated rules for what funds can or cannot be allowed to be used for closing. Here are some Hot Buttons:
Cash – Cash cannot be considered as legitimate funds for closing as it cannot be traced to a source. Even though cash is a viable currency nearly everywhere else in the United States, unless you are paying cash for the whole home, cash can cause real issues. If you plan on incorporating cash on hand into your next home purchase, speak with us as early as possible.
Loan Programs do allow a buyer to receive a gift for funds toward closing, but this comes with its own set of rules. The person offering funds must be a guideline accepted relationship to the buyer(s). If you wish to use gift funds toward your home purchase, please alert us as soon as possible in the purchase, so we can ensure that the proper guidelines are followed and no delays ensue.
These are some of the items that pose the most confusion for many first time buyers. For more information, please contact me at email@example.com or (314) 856-5626. My name is Jeremy Durham, NMLS# 989777. I look forward to speaking with you soon!
Buying a Home in St. Louis, MO
By: Denise Grab
If you are planning on purchasing a home, I would start asking people you know and trust for referrals, especially for a Realtor ®. I am sure no matter what, you will hear either how awesome the experience was, or how horrific the selling and buying process was.
By asking people you trust, it will help you to decide who is going to provide you with the best options and service for your scenario specifically. You want to make sure that you are going to get as much equity from your home as you can, while covering their fees, to use as a down payment on your next home. Just a reminder, if this is your first home purchase, having an agent represent you in the buying process is COMPLETELY FREE and STRONGLY RECOMMENDED!
I know I started off the article about selecting a realtor first, and that was just to get your attention, but the real person that you should contact first, is your loan officer here at First Integrity Mortgage Services. We, at First Integrity Mortgage Services in St. Louis, always provide our customers with options for buying their first or forever home. It is imperative that we are all on the same page concerning a monthly budget and payment. Most of the time, you will be able to qualify for a monthly payment that is higher than what you think you can afford. It is our job to make sure that you are fully prepared, financially, so that when you are house hunting, you are fully prepared for what is ahead in the loan process and know what to expect on closing day. After all, even if you are borrowing 100% of the purchase price or putting 20% down on your first home, your money matters and we want to make sure that you are familiar with every step of the process.
Step one in the qualifying process will be to complete a loan application on our secure website. You will be asked to provide the basic information, such as your Name, Birthday, SSN, 2 Years Employment history and some simple yes or no questions. Nothing too complicated. From this, your First Integrity loan officer will run your credit and ask you for documentation to verify the information that you submitted on your application. This documentation includes 30 days' most recent pay stubs, two years' most recent tax returns and W2’s and 2 months' most recent bank statements. Is this all the information we are going to need? I wish, but it will be a great start and will put us on track to a solid pre-approval.
At First Integrity Mortgage Services in St. Louis, we issue a true pre-approval letter, not a pre-qualification letter. The difference between the two is simple. Approval means that your documents have actually been reviewed vs. qualification is that your lender provides a letter to you based on the information that you inputted on the application. Not that we don’t trust what you submitted, investors have several overlays on employment and income that we want to make sure we have all squared away before you list your home or put that offer in on your first home. The last thing you want to hear is that your loan is declined after you have sold your home and have spent several hundreds of dollars on inspections. A solid pre-approval will also make the loan process faster!
Generally, we can close a loan in as little as 3 weeks but can vary depending on the loan scenario.
Buying a home is stressful, but if you have the right team to guide you through as we do at First Integrity Mortgage, it will be a little more bearable! Call us today FIRST to get PRE-APPROVED for your home search and we will be sure to set you down the right path. Check out our Google reviews! They are a true testament to our 5-STAR customer service!
For questions, comments, or concerns, please contact, me, Denise Grab at 314-220-9620 or firstname.lastname@example.org, NMLS# 738524. I look forward to hearing from you!