WHAT TO EXPECT WHEN CONSTRUCTING A HOME IN MADISON 2018
One of Madison housing market’s biggest struggles recently has been a lack of new inventory coming on the market. New construction hasn’t always kept pace with the growth of U.S. households, and while construction has picked up in recent years, much of the development has been in multifamily buildings – apartments for rent or condominium’s close or in downtown Madison – leaving many prospective home buyers out of luck.
“Much of the new development areas around Madison and its suburbs are trying to create an environment that allows tenants / residents – all users – to have that live, work and play feel,” with a mix of retail, office and residential spaces so residents don’t have to travel far, Jill Surek of Dane County Real Estate says.
In addition to more mixed-use communities that blend commercial and residential property, expect the size of individual apartments, condos and houses to get smaller as well. Richard Surek a licensed real estate agent and senior mortgage advisor for Dane County Real Estate & US Lending Corp in Madison, WI., says “many new apartments and condos in the city are shrinking to increase profit for developers, and residents so far have been willing to compromise. Many of my clients have noticed it just driving down E. Washington Avenue.” These smaller footprints are appearing in many other major markets as well, including Milwaukee, WI.
“Four years ago, developers were making two-bedrooms that were 1,200 square feet, now they’re making them 1,000 square feet,” Jill Surek says. “From the buyer’s angle, it’s: ‘It’s not enough square feet for me, but it’ll still work.’ They want to stay in the city.”
BUILD A NEW HOME IN DANE COUNTY AND AVOID THE SLIM REAL ESTATE INVENTORY ISSUES
It’s exciting to have a home built for you in or around Madison, but the intricacy and unfamiliarity of the mortgage loan process for the first time home buyer or any new construction client can temper enthusiasm. Here are some of the basics of home construction loans and so you can be ready when you decide to build your own new home in Dane County, WI.
CONSTRUCTION LOANS FOR YOUR NEW DANE COUNTY REAL ESTATE
There are two main types of home construction loans:
Construction-to-permanent loan: You borrow to pay for construction. When you move in, the lender at US Lending Corp. converts the loan balance into a permanent mortgage. It’s basically two loans in one.
During the construction phase, you pay interest only on the outstanding balance. The interest rate is variable during construction, moving up or down with the prime rate. If the Federal Reserve raises or decreases short-term interest rates while the house is being built, your interest rate will change.
We then convert the construction loan into a permanent mortgage after your contractor finishes building your new Dane County home. The permanent mortgage is like any other mortgage. We can help you choose a fixed-rate or an adjustable-rate loan and specify the loan’s term, typically 15 or 30 years. When you’re ready, contact Rich Surek to help you through the entire process.
Stand-alone construction loan: Your first loan with US Lending Corp. pays for construction. When you move in, you get a mortgage with one of our lenders at US Lending Corp. to pay off the construction debt. It’s two separate loans.
A stand-alone construction loan can work out well if it allows you to make a smaller down payment. That can be a major advantage if you already own a home and don’t have much cash for a down payment but you will have more cash after you sell your home. You can live in your current home while your next home is under construction. This convenience may have some drawbacks too. You will be paying two sets of fees at closing for the construction loan and for the permanent home loan. You may not be able to lock the new permanent home loan’s rate, which can rise or fall.
KEEP UP YOUR CREDIT AND FINANCIALS DURING NEW HOME CONSTRUCTION
If your financial circumstances change for the worse during construction, you may find it difficult or impossible to qualify for a mortgage. When contact Rich or Jill when you apply for a loan to build a home, our lenders at US Lending Corp. don’t have a complete home as collateral, so qualifying for a loan can be more difficult. Our lenders will want details about the home’s size, the materials used and the contractors and subcontractors who do the work. The general contractor you choose to build your home in or around Madison, WI will generally be able to supply much of the information the lender will need.
Basically, since this may be a more difficult path to home ownership in Dane County, WI. The rewards can great, you will have more options to choose from in the Madison Home Marketplace and usually get the amenities you prefer. However, since lenders require more checking in with the home building process, they need you to stay in good financial standing!
Please contact our team below, we look forward to walking you through every step with your pace in mind!
Richard Surek | Senior Mortgage Advisor | 608-960-4363 | firstname.lastname@example.org | richsurek.com