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First, don’t get forced into the builder’s preferred financing unless the incentives make it worth your while! If you can, find a loan rep who will get you pre-approved somewhere. Yes, you do have to give the builder a deposit of some sort (or it’s called a good faith deposit). Hopefully your loan rep will explain everything to you in plain language and through the whole process. You may want to contact a company “Home Loan Experts” who helped me a lot! They can shop for the best deal for you! Good luck!

100 Percent financing is available. I know of many companies that will do it, for instance Counrtywide has the following:

New Home Construction
For the customer planning to build a new primary or second home.

Land purchase can be included in the loan amount.

Financing up to 100% of construction costs.

Reduced documentation loans.

Land, permits, soft costs and commissions can be paid at closing.

Up to 10% advance on contract price can be paid at closing.

Progress-based disbursements during construction providing 100% of your completed labor and secured material cost and a percentage of your profit with each draw. (for the builder)

Funds can be sent directly to the builder (subject to customer authorization & state requirements).

Once the home is complete the construction loan converts to the permanent loan.

Up to 18 month construction terms.

Flexible rate options:

Prime Rate Plus**
Variable rate interest-only payments during construction.

Customer can select from a variety of fixed or fixed period ARM products for the permanent loan with no additional qualifying!

Countrywide’s SecureRateTM provides rate protection for up to 18 months; once the home is complete the customer locks into the SecureRate or current market rates, whichever is lower!***

Single Rate****
Interest-only payments during construction.

Customer selects and locks into one product for both construction and permanent loans: rate and pricing are based on the length of construction.

Another company has the following:
A Construction 1Close loan is mortgage financing for new home construction. This program combines financing for a lot purchase (or lot payoff), home construction costs and mortgage into “1 loan”.

There are 2 phases to this program: an “interest only” construction phase and a permanent mortgage phase; however, there is only 1 closing. The borrower pre-selects a construction term of either 6, 9 or 12 months based on the amount of time needed to build the home. The Builder, or General Contractor, requests incremental draws during the construction phase for payment of materials, supplies and labor. “Interest only” payments are due each month based on the outstanding drawn balance of the construction loan. Once the home is 100% complete, The bank automatically converts the loan into the permanent mortgage; thus, no additional fees, re-qualification, or paperwork is required.

THE LOAN PROCESS:

Getting Pre-Qualified
A mortgage pre-qualification will provide you with an estimated budget for building your new home. This budget is based on an estimate of the maximum loan amount you’ll qualify for. You can get pre-qualified in just a few minutes over the telephone or by contacting a Mortgage Broker / bank. Please keep in mind though, a pre-qualification is not a guarantee you will be approved for a mortgage. A formal mortgage approval, sometimes called a “commitment,” requires a full application, receipt of all necessary documents and a review by a mortgage underwriter.

Please keep in mind:

With a pre-qualification you will provide your income and asset information – which is not verified. So a pre-qualification is only as accurate as the information you provide
In order to help determine your overall credit worthiness, a credit report may be obtained with your permission. At time of application, a more detailed credit report will be reviewed

Applying
Once you complete a contract to purchase a home from the builder of your choice, you’re ready to apply for your mortgage. A mortgage consultant will complete a mortgage application with you. In addition, a detailed credit report will be obtained at this time.

At time of application, you will typically be asked to provide:

A check for appraisal fee
Two months pay stubs from your present employer (if applicable)
Financial documents including W-2s for the last two years (if applicable)
Bank statements for the last two months and billing statements for any open loans (if applicable)

Mortgage Approval
Following receipt of your signed application and other documents, a mortgage underwriter will review your application. If you are approved, you will be informed of the loan amount you are approved for and any conditions that must be met prior to your loan closing.

As part of the approval process, you will be asked to supply the following:

A complete set of plans detailing the design and layout of your home. The plans, along with specifications describing the components of your home, are required prior to ordering an appraisal. An appraisal is used to determine the fair market value of your home. Your home’s value is determined by a professional appraiser based on the value of the vacant land and the value of like structures (based on the sale of comparable properties) in the surrounding area

A copy of the deed for your lot, if you currently own it, or a fully executed sales agreement for the land if you are purchasing it

A signed contract(s) between you and your builder or home manufacturer/general contractor specifying the costs of all materials and labor necessary to complete your home. If you are acting as your own general contractor, signed contracts with all subcontractors are required at this time

Creating A Disbursement Schedule
Once your mortgage is approved, a disbursement or “draw” schedule will be created. This schedule is a timetable for payments to your general contractor, or builder, as construction progresses. Disbursements, or “draws,” are made as pre-determined milestones in the construction of your home are completed (i.e. pouring of the foundation, enclosure of the structure, etc.). Please note that various companies have different draws, the schedules are flexible with each company.

When you or your builder request a disbursement or draw payment, the following steps will occur:
An inspection will be ordered to ensure the work has been completed
The inspector will conduct an inspection and complete an inspection report
If applicable in your state, a title “bring down,” or verification that no subcontractor or other liens have been placed against the property, will be conducted

Upon receipt of a satisfactory inspection report (and satisfactory bring down if applicable) a check for the requested draw will typically be sent to you. Direct payment to the builder is available upon written request from you prior to each draw

Mortgage Closing/Settlement
Once the disbursement schedule is finalized with you and your builder, and any other closing conditions have been met, your loan can be prepared to “close.” Commonly known as the mortgage settlement, this is the time when closing costs are paid, final loan documents are signed and any loan balance associated with your land is paid off. Following settlement the construction of your home typically begins.

Please keep in mind:
Closing costs typically include attorney fees, lender fees, and fees paid to the title company.
You will be asked to sign an Acknowledgement of Modification Fees. This is an estimate of fees to be paid upon completion of your home, when your construction loan modifies to a permanent mortgage

Home Construction
Now that your loan has closed, construction of your new home can typically begin. At this time any deposits due to the manufacturer and/or builder will be paid. Upon completion of each phase of construction, you or your builder will request disbursements or “draws” as outlined in your disbursement schedule.

Please keep in mind:
A building permit, authorizing construction of your home, must be received prior to construction beginning and any monies being disbursed
With the exception of initial deposits, an inspection must be completed prior to each disbursement

During construction you will make monthly, interest-only payments based on the amount of money disbursed to that point. Your monthly interest-only construction loan payment will increase from month to month as your home is built and additional draws are paid

Modifying to a Permanent Mortgage
Upon completion of your home, your construction loan will convert, or “modify,”
to a permanent mortgage. Your loan payment will then include principal, interest and escrow amounts (if applicable) for taxes, homeowner’s insurance and private mortgage insurance. To expedite this process, it is recommended that you contact the lender you are using approximately 10 days prior to the anticipated completion of your home. They will then prepare all necessary loan modification documents and forward them to you for signature.

The following steps will occur at this time:

A final inspection of your home will be ordered to confirm all work has been completed and the original appraised value of the home is still accurate
A final title bring down will be performed to assure no liens have been filed against the property
If applicable, borrower funds will be deposited into an escrow account for payment of real estate taxes, homeowner’s insurance and private mortgage insurance
Modification fees including interim interest, inspection fees and bring down charges are also paid at this time

Home Building Tips
Whether you’re building your first home or your dream home, these home building tips can help guide you through the process:

Selecting a lot.
When deciding where to build your new home, there are many things to remember.
Be sure to “walk the lot” with your builder to ensure it’s suitable for the type of home you’re considering.
Have a clear understanding of the municipal zoning laws, which can be a bit more complicated than “residential” versus “commercial.”
To avoid future surprises, always be aware of the land use plans for nearby properties.

Selecting a lender.
When selecting your lender, there’s a lot to consider. For instance, the lenders you are considering offer a wide range of programs including; Jumbo, Interest Only, Bi-Weekly Mortgages and “Piggy-Back” Loans – ideal for self-employed buyers.

Selecting a builder.
Although it’s natural to focus on the design of your new home, you should also use great care when selecting a builder. That’s because how well your home is built is at least as important as how well it’s designed. When selecting a builder consider visiting a job site to see if you like their workmanship. Is it a clean and safe workplace? Do they have experience building the type of home you’re considering? Are you confident you can work with the builder to resolve any problems that may arise? These are just a few of the things to investigate when building a home.

Reviewing your building contract.
Spending time understanding your building contract, before you sign it, will help to avoid costly misunderstandings later. Although we can’t offer legal advice, which is best left to an attorney, be sure your contract specifies costs, policies and procedures for all aspects of the job including change orders, construction delays and payment arrangements. And confirm it includes a detailed list of building specifications and materials

I know this is lengthy, but hope it was helpful.

THIS WILL TAKE A FEW MINUTES. BUILDERS USUALLY DO THEIR OWN FINANCING AND THIS ALLOWS THEM TO GIVE UPGRADES, OR SUBSTANTIAL ASSISTANCE IN CLOSING COSTS, OR LOT FEES. YOU DO NOT HAVE TO USE THE FINANCING THEY ARE PROVIDING YOU CAN GO TO YOUR BANK AND BRING YOUR OWN MORTGAGE COMMITTMENT TO THE TABLE. IF YOU HAVE ANY OTHER QUESTIONS ON THE PROCESS, EMAIL ME HIGHERGROUNDFINSVC@YAHOO.COM