Sunday, August 14, 2011


Once the decision is made to build or buy existing you must get your funding together.  Funds can come from several sources including selling your existing home, personal savings, and getting a bank loan.  In today’s market CASH IS KING!  The more cash you have to put in the deal the better your chances are of getting the deal done.  

Getting enough from the sale of your existing home may be a challenge. With today’s lower property values many homeowners find themselves upside down or not able to get enough from the sale of their existing home to make buying or building a possibility.  If you do have equity in your home this is the perfect source of funds to buy your new home.  With today’s tough lending standards it is important to have a good supply of cash and/or equity to make either buying or building a reality.

Getting a bank loan is much more difficult today.  In an effort to control the lending industry and not have a repeat of what happened during the building boom the government has placed stringent regulations on lenders.  In addition, lenders have experienced massive mortgage defaults over the past several years and are not taking any risk with new loans.  The zero down deals are gone. Banks today are requiring 20% or more equity in a conventional loan situation.  If the property you are purchasing is in an economically challenged area (most of Florida) the bank may require that you have more than 20% equity.  The more cash or other equity (owning your own lot) you have when you go to the bank for a loan the better chance you will have of being approved.

Don’t forget to shop for your money just like you are shopping for your new home.  If you have a banking relationship make that your first call but don’t let it be your last.  Check out the other lending institutions in your area to be sure you are getting the best deal.  This extra step could literally save you thousands of dollars.  Interest rates and points may be your first priority when comparing lenders but be sure to compare closing costs as well.  Many lenders add hundreds of dollars in “junk fees” at closing.  Don’t fall for that.  Lenders are required to give you a closing estimate so be sure to compare each lender’s deal carefully.

If you can qualify for financing and have enough cash or equity to get the deal done there is one more challenge, the appraisal.
Marla Peters is a licensed Florida Certified Building Contractor and Florida Certified Public Accountant, she is Vice President of The Triad Group, Inc. a general contractor building in SW Florida since 1981.

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