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Real Estate Home Mortgages/Mortgage Application for New Construction

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Question
Hi,

My husband and I recently signed a purchase agreement for a new construction scheduled to be completed in March.  Due to the estimated completion date being so far away, the seller verbally told us to ignore the part of the purchase agreement that said we have to apply for a mortgage within 10 days.  Now, however, the seller is asking us to apply for a mortgage.  At this point, the seller doesn't even own the land that our house will be built on--the developer does.  The seller plans to buy the land and begin building by December.  Could my husband and I lose the house (and our deposit) because we haven't yet applied for a mortgage?  We just don't want to lock in our rate at this point since the completion date is so far out.

Thanks.

Answer
Hi Megan -
thank you for your question!  It is always my advice when dealing with contracts to put everything in writing.  Whenever there is a question that becomes a legal issue, the writing is your proof.   

I would have to actually see the contract to know whether or not your security deposit is at stake.  There are many clauses that allow for the release of monies and many clauses that would lead you to forfeit your deposit and therefore I am unable to answer it in a simple yes or no.  

Locking in an interest rate at this point would be highly unlikely as a lender is not going to honor today's interest rates six months from now.  The seller may be asking you to apply for a prequalification to make sure that you are lendable. There may be issues the seller is unaware of (bankruptcy, foreclosure, short-sale, income, credit, etc.) that may disqualify you from a loan.  In order to prevent surprises down the road it is a security measure on the part of the seller to make sure the sale will likely go through.  If you and your husband have every intention of following through with the purchase, I would advise you to apply for the mortgage and provide the prequalification to the seller.  You will not actually be taking out any loan now, but rather showing to the seller that at this time, you are qualified to purchase the home.  Additionally, there may be some things that your loan officer can have you improve over the next six months in order to get you an even better loan.  It can be a win-win situation.

I hope that is helpful, feel free to contact me with additional questions if you have any!

Thanks,
Sadie
About Real Estate Home Mortgages
This topic answers questions related to purchasing a home, owning a home, home ownership, mortgage education, mortgage applications, and mortgage needs whether buying a first home or refinancing a current loan. Issues related to home ownership, home equity, mortgage education, refinacing options, home improvment finacing, first time home loans, home equity loans, vactation home loans, and mortgages for investment homes are dealt with here also. Though not the primary focus of this topic, Home Equity Lines of Credits (HELOCS), reverse mortgages, and calculating home equity may also be asked. If you do not see your home mortgae, home finacing, or home equity question answered in this area then please ask a question here

Real Estate Home Mortgages

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Sadie Benson

Expertise

I can answer all mortgage related questions. I am knowledgeable in planning to buy a home, credit repair, down payment assistance programs, FHA loans, VA loans, USDA loans, conventional loans, Home Path loans, etc. I can answer questions related to all mortgage disclosures and finance. If there is a mortgage related question, I can answer it!

Experience

I have been a licensed real estate agent since 2000. I have worked in commercial and residential lending since 2005. I have sold both new and resale homes and have worked as a loan originator, underwriter, processor as well as a Realtor. I have been licensed as a Real Estate Broker since 2008 and have had my NMLS Endorsement since required by law in 2010.

Organizations
Sacramento Association of Realtors, California Association of Realtors, National Association of Realtors, Orangevale Chamber of Commerce

Education/Credentials
I have all required real estate and mortgage related courses to obtain my California Real Estate Brokerís License as well as my Nationwide Mortgage Licensing System Endorsement. I have an AA degree and am currently enrolled at Colorado State University completing my Bachelorís Degree in Business Management.

Past/Present Clients
Due to privacy and confidentiality laws the listing of my past and current clients without their prior written consent would be unethical.

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