ONE OF THE BEST TOOLS FOR CUSTOM HOMEBUILDERS

When it comes to building a new home, a Construction Permanent Loan may be the your best tool in the box.

Houses cost a lot more to build today. Home Builders are constantly facing ever changing regulatory requirements and updated building codes, all of which are well intentioned, but ultimately drive up the cost to built a new home.  Builders are continually challenged to find way to save their clients money and compete with the undesirable dated resales within the market area.

Often overlooked as an option is the cost savings that a Construction Permanent Loan can provide, when in fact it may be one of the best ways to save your clients money in a multitude of ways.

Beautiful Staircase by RHK Builders

From the builder's standpoint, it is fairly easy to establish the simple cost savings from the interest carry the pay during the construction period, but the savings can run far deeper than that.  

There is also the cost of a second settlement, in most cases to deliver a post construction completed home, the builder must purchase the lot, pay transfer and recordation taxes, settlement charges and ultimately these fees become part of the builder's cost which are then past along to their clients who then have to pay them all over again when closing on their new home.  

Depending on the State and County where the home is being built, these fees can be substantially higher when closing on a completed home vs. simply transferring a lot and having the house built after the fact.

This is before we factor in other costs that a builder must consider when building a client's new home, like what happens if the house is completed and the buyer can't settle?  Yes, the "walk-a-way" as some builders call it.  The client who just before settlement decides to go out and purchase all of their new furniture on credit cards, they miss a payment on their auto loan, they change jobs, get relocated, etc... When they do, you know what happens, they can no longer qualify to buy their amazing new home.  

A spec home designed and tailored toward one buyer's specific needs might be hard to sell to another and the builder might have to deeply discount or spend additional money to make it more presentable to the average buyer.  These expenses are factored in to pricing / profit margins based on past experience.

Clients who use Construction Permanent Financing to build their new homes eliminate the additional interest carry, the builder paid closing cost as well as the potential loss differential of the walk away which enables the builder to be a lot more competitive cost wise and help drive down the cost of a new custom home.

It is important to note the homeowner's benefit as well as not only do they get to save money via reduced builder's overhead costs, but they get to save by having only one settlement which can be a faction of the cost of buying a post production home.

Additionally, choosing a Construction Permanent Lender who offers financing options like a 30 year fixed Construction Permanent Loan can enable them to lock in their long term interest rate up front at time of application just like a traditional home purchase, in lieu of having to wait for 6 to 8 months to lock their rate while their new home is being built in a rising rate environment or having to pay for extended rate lock fees.

When it comes to saving your clients money and creating more business, a Loan Officer with a great Construction Permanent Loan just might be the best thing in your tool box!