Buying a New-Construction Home in Middle Tennessee: Deposits, Delays, and Your Loan
By Mark Jost, NMLS #150914 · Published
Building a new home, or buying one from a builder, is exciting. It is also different from buying a home someone already lives in. There is a builder contract, a deposit, a long wait, and a loan that has to stay ready the whole time. Here is what I tell my buyers in Nashville, Franklin, and all around Middle Tennessee.
The builder deposit
If the home is not built yet, the builder may ask for money up front. This is called a builder deposit, or earnest money. The Consumer Financial Protection Bureau (CFPB) says to ask the builder, before you commit, under what conditions the deposit can be returned. Get the answer in writing, and know the date when it can no longer be returned.
You can pick your own lender
Many builders work with a lender they like. The CFPB says you do not have to use that lender, and you have the right to shop around for a better deal. Compare the full offers side by side before you choose.
The wait and your loan lock
A rate lock keeps your loan terms from changing between your loan offer and closing. But the CFPB says it only holds if you close within the time frame set in the lock. Locks are often offered for 30, 45, or 60 days, and sometimes longer. A new home can take many months, so timing matters a lot. The CFPB also says a lock can be costly to extend if you need more time.
Here are good questions to ask a loan officer. They come from the CFPB:
- What time frame does my lock cover?
- Is a longer lock available, and what does it cost?
- What happens if my closing is delayed and the lock runs out?
- Are there any reasons my locked terms could still change?
Also ask your builder for a written estimate of the finish date. Remember that a date from a builder is an estimate, not a promise. Talk to your loan officer before you settle on a move-in or closing date, so the loan plan and the building plan match.
A lock can still change if your file changes
The CFPB says a locked rate can still change if your application changes. That can happen if you change your loan amount, your credit score drops, or the lender cannot document your income. A long wait is a time to be extra careful. Try not to open new credit or take on new debt while your home is being built, and tell me before you make any big money moves.
Get an inspection, even on a brand-new home
New does not always mean perfect. The CFPB says to schedule an independent home inspection as soon as you can, so you have time to fix problems. It also says an inspection is different from an appraisal. The appraisal is for the lender and is about value. The inspection is for you and is about the condition of the home. Ask the builder early when you may bring an inspector, and ask for any repair list in writing.
The CFPB also says to attend the inspection if you can. You will understand the report much better.
Read the contract before you sign
A builder contract can be long. Read it slowly. Look for the price, what is included, what costs extra, the estimated finish date, and what happens if the home is late. You may want your real estate agent or a Tennessee real estate attorney to look it over with you.
A quick example
Picture a family that wants a new home in Spring Hill. They like the builder's model and are asked for a deposit. Before they pay it, they ask when it can be returned and get the answer in writing. They talk with me, and we compare the builder's lender with other choices. We also plan how long the loan lock should be, based on the builder's estimate. When the finish date moves back a few weeks, they call me right away, and we check the lock before it runs out. They also hire an inspector to visit before closing. Nothing surprised them on closing day.
Your checklist
- Ask when your deposit can be returned. Get it in writing.
- Compare lenders. You do not have to use the builder's lender.
- Ask how long your lock lasts and what a longer one costs.
- Get a written estimate of the finish date and ask what happens if it slips.
- Hire your own inspector.
- Keep your credit and income steady until you close.
Let's make a plan
If you are thinking about a new home in Nashville, Franklin, Brentwood, or anywhere in Middle Tennessee, call me before you sign a builder contract. I will walk you through the loan side so you know the steps ahead of time.
Sources
- CFPB: Find the right home (new construction considerations)
- CFPB: What's a lock-in or a rate lock on a mortgage?
- CFPB: Schedule a home inspection
This article is general information, not a loan offer or legal advice. Every loan depends on credit, income, and property review. Mark Jost, NMLS #150914. Heathrow Mortgage, Company NMLS #1849599. Equal Housing Opportunity.