Mortgage Motivation
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Mortgage Motivation
Demystifying Home Construction: A Guide with Christian Gordon from GMFS
Ever wondered about the mysteries of building your own dream home? We're here to shed light on the entire process, from loan approval to the final brick, with our latest guest - the talented construction specialist, Christian Gordon. Christian’s expertise in this field is unparalleled. She shares her wisdom on everything from verifying your builder’s credentials to using land equity as a down payment. She emphasizes the importance of thorough research and the selection of a reputable builder, and her insights are simply indispensable for any future homeowner.
But that's not all! We also delve into the nitty-gritty of modifying your mortgage into a full 30, 20, or 15-year term after your construction is completed. We guide you step by step, from choosing the initial term to securing a certificate of occupancy and handling payments. Christian’s role in supporting our clients and builders during the construction process is invaluable, and her insights will empower you to embark on your home construction journey confidently. So tune in now, and equip yourself with the knowledge to build and finance your dream home.
For more on GMFS and MiMi:
https://gmfsmortgage.com/branch/lafayette/
Welcome to this episode of Mortgage Motivation. Super excited to have Christian Gordon here, definitely not a new face to the team, but assisting in a new way in addition to some of the things that you know you do already. Welcome to Lafayette, thank you. Thank you for driving in this weather. You know Christian Gordon is our construction New construction specialist, which basically handles the draws, and she works a lot with one of the main builders that we work with Manual builders, thank you. We had lunch today earlier with Christina and you know talking about the draw process and how that's just really going smoothly. But I would like to just spread the word out to all our friends in the Baton Rouge area who is looking to build a new home and with manual Christian is here to help assist of any documents you have Basically going to be our new face and Baton Rouge and assist me as a loan assistant with any clients that need servicing in the Baton Rouge area, whether you're looking to purchase or build.
Speaker 2:Right, right and manual builders office is right there in town center and they can walk in at any time.
Speaker 1:Any time Correct.
Speaker 2:Yeah, it's an open office. They have a floor plan showroom to where you can go look at what they do.
Speaker 1:And of course, they prefer. If you make an appointment and if you want to meet with Christian and Jenna and the crew all at the same time, you can do that. Or if you want to make that appointment with manual, they'll get in touch with Christian and myself and and we're here to help you. So if you, in the Baton Rouge market, you're looking to build, you have a team between Baton Rouge and Lafayette and we're excited to service you and thank you for being part of our team. Yeah, thank you.
Speaker 1:Today, christian and I are going to talk to you about the construction process. We have several different types of construction loans. Our most popular is our one-time clothes, but for the most part, you go through the same process. I know a lot of people like they want to build. There's such a shortage of homes right now and they can't find the home of their dreams, so but they're scared to build and if anything, feedback we get from our clients and our builders is how easy we make it, and I think a lot of it is just because they don't understand. So for all my listeners out here today, I just want to give you a brief summary of the process and how we hold your hand and we just walk you through it from A to Z. And Christian's going to help me do that today because she's so involved with our team here in Lafayette. She works in our Baton Rouge corporate office. But we're going to kind of talk about the process to give you just a general idea of how the construction loan works.
Speaker 1:So step one of course you come to me for a loan approval. Right, we determine how much you can afford, and that's based on an estimate, because I often say what comes first, the chicken of egg. You know, it's important that you meet with the builder to kind of get an estimate of what you're looking at, what your needs are, and then we gotta make sure you can afford it, or we need to make sure you can afford it. And then you go to the building and say, hey, this is what I can spend. So it's important that you develop that budget. You know where you're gonna be at the end, or at least estimate where we're gonna be at the end before you get started.
Speaker 1:So step one is loan approval. Let us look. We're gonna ask you for tons of documents. We're gonna ask you for W-2s. We're gonna ask you for bank statements. We're gonna look at your credit and it's never too early to start the process. If you're interested in building and you have issues, the earlier you start, the better road and outline we can path out for you. So once we go through the approval process, the next step is you gotta choose the builder, right, right. Once you choose the builder, then you go to Christian, which we handle that for you, but she's doing paperwork in the background and what are you doing at that point? Once they choose, the builder.
Speaker 2:So what I do is make sure that your permits are in line. That's gonna be your first step is getting permits. We do. We fund your draws as you're going through the process. So making sure that you're building according to plans at your slab, framing, roughen, just make sure everything is going the way that it's supposed to, according to your plans, and appraisal cause, you know has to match.
Speaker 1:So you do do a little check on the builder, though, before we actually start right.
Speaker 2:Right, we do a verification process on our builders just make sure that their general liability license and their workman's comp is in order and that they have references that can say hey, we've worked with this builder before too. So we do do kind of like a little right. I don't know what to call it, but we do check all of that to make a verification and make sure they have. I call it verify cause you know by no means.
Speaker 1:We work with several different builders and always tell my consumer you should like almost interview your builder and make sure it's someone that you can work with. But it's your responsibility to look at different homes that they built in the past and make sure that's what you're looking for.
Speaker 1:We're not looking at that. We're looking to make sure that the subs are getting paid, that they're fully insured, that their license are up to date, and that's some of the things that Christian doesn't hurt in. And once we've done that, then it's okay to go ahead and sign that contract so we can order the appraisal. Once we get the appraisal in from, the clock really starts ticking at that point, because that determines exactly how much money we can lend and often if you own your own land, you don't need any additional funds.
Speaker 1:We use the land as your down payment and a lot of people don't understand that it's really the equity cause we can lend off of the value all right, because you already own that property. So if you own property, don't be afraid to give us a call and get started, cause often you won't need additional funds depending upon how much equity you have. So at that point we would get an appraisal done, we would underwrite the file and we would actually go to closing. Your loan would close and we would take the money that you need to build your home and it goes into what we call a little escrow account. And that's where Christian comes into your life and she is your best friend for the next nine months, or six months by the time your house is in the construction.
Speaker 1:Yeah, so let's talk about some of the challenges the consumer has at that point, how you walk them and navigate them through that.
Speaker 2:So for one of my main builders that's out here in Lafayette we have a pretty good flow. They follow like a five draw schedule. So whenever the builders get paid through construction from your loan, we pay them at slab, then we pay them at foundation. What I do is I send out an inspector to go to that property and the inspector is going to view the property, send me the report back, let me know if it's been built up to however far the home needs to be built, and then I request the draw from the borrower and say, hey, so and so. I got your inspection back. It's showing your house is being built where it needs to be. Can I pay your builder X amount of dollars?
Speaker 2:Most draw schedules that we follow for builders is a five draw at 20%. So the way that our construction loans work is you're going to pay interest off of what we've advanced off the loan so far. So say, for instance, you have a $200,000 loan broken down into five draws it's roughly 40 something thousand. You're only going to pay interest on that first draw that you've taken and then, once you get to the second draw, then you'll pay interest on the first draw and second draw. So your interest builds as your house is being built. So, upfront, your interest could be low because you haven't advanced off of your loan that much, and then the end, your interest will be a little higher because you've advanced more of your full loan.
Speaker 1:And I think that's some of the things the consumer has a hard time understanding. You're not making a full payment while your house is under construction, correct? So if you don't draw, you don't pay Right. So it's not until the draw process actually starts that you actually start paying interest. So the best way I like to explain it is like if you had a piece of the pie and you cut it into five pieces. So you're only going to pay a little interest for that first piece. You eat Right, and by the time the pie is completely eaten, then your belly's full and your interest is a little higher. And that's when we go into the modification process.
Speaker 1:Modification does not mean you're closing again. It means you're modifying the loan. We do our best, we try our best. Of course you have those interest payments for us to project any cost you may have upfront. So when it comes time for modification you do not need any additional funds besides, unless you have an interest payment. So we even collect what we estimate your homeowner's premium to be when you move in the home.
Speaker 1:So at modification we're getting a payoff from Christian right on how much they've spent, and then we're just modifying that loan into long-term financing. So at that point you would be modifying into a full 30, 20, or 15-year mortgage, whatever you decided and chose at the beginning. So that kind of just wraps up and summarizes and then you actually start making your payment, right, yep, so that kind of summarizes the construction process from beginning to end and I want to thank you for you really do a great job. Thanks, you know working with our clients while they're under construction. Our builders love working with you, we love working with you and I want to thank you for being part of the team and helping with the process.
Speaker 2:Yeah.
Speaker 1:I like working with y'all too. Thank you so much. Thank you for joining me. Welcome.