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It’s no secret that the market is changing. Although interest rates are not at the 10% of the ‘80s or even the 8% of the ‘90s, the sharp change from 2.7% to over 5% in 2022 does not feel good. In addition, constructions costs have escalated sharply within the past year. Despite the changes, people still need homes.
So, what are the best financing options in today’s market for those who prefer building a new home rather than buying a used home?
Most of our clients are seeking programs that allow them to lock in their sales price and lock in an interest rate for an extended period of time.
Some builders choose to build on a “Cost Plus” system which adds a percentage of profit to the actual price of material and labor during construction. Other builders have clauses in their contracts that allow them to increase prices if their construction costs increase after the contract is signed. Both practices put the risk of inflation during construction on the purchaser. On the other hand, Onyx+East is a builder who commits to the sales price at the time of contract. There will be no surprise price increases passed along to the purchaser between contract and closing.
There are two terrific rate lock options available through Onyx+East’s preferred lenders. For the Alloy line of single-family detached homes, First Internet Bank offers a loan that is getting more attention in this market. Arthur Haan, Loan Officer for First Internet states, “Our new construction permanent loan allows a buyer to close on their loan and lock their interest rate before construction begins. This eliminates the risk of rising rates and price increases. The appraisal is also completed before construction starts. Additionally, if interest rates decrease during construction, then First Internet will give them the new, lower rate after construction is completed.”
For townhomes, Flagstar Bank has created a rate lock program that allows a buyer to lock in their interest rate for up to 365 days. “Our extended rate lock program is gaining popularity.” Says Kellie LaMonaca, Senior Loan Officer at Flagstar Bank. “An upfront deposit secures the rate lock, and once the loan successfully closes, the full amount of the deposit is applied toward the down payment and closing costs. Buyers like the fact that they can forecast their payment months in advance rather than risk rate increases that could take place during construction.”
With inventory remaining at all-time lows, the demand for housing will continue to propel the markets forward and programs like these will emerge to provide new buyers confidence in the overall cost of ownership. To learn more about these opportunities and how you can purchase a new Onyx+East home go to www.onyxandeast.com or email us at firstname.lastname@example.org.