Which Types of Loans Are Available for New Construction Homes in South Carolina?

There are a lot of different routes you can take when it comes to becoming a homeowner. You could purchase an available home that’s already built but never lived in, a resale home that has had previous owners, or a new construction home that’s built from the ground up just for you. Depending on the route you take, you’ll have several different options for financing your new home. While you may already know some basic information about loans and how to obtain one, did you know that there are specific types of home loans for new construction?

For over 30 years, Cothran Homes has built many new construction homes of superior quality in South Carolina. We understand that financing can seem like the most daunting part of building your home, but we’re here to help ease your worries. We’ll explain some of the types of loans for new construction homes as well as what to expect during the mortgage approval process here in South Carolina.

Loans for New Construction Homes in South Carolina

First, let’s tackle the meaning of what a new construction loan is. It is a short-term loan that covers the cost of custom home building. Typically, this loan is only for a year and covers almost everything needed for construction, such as the land, labor, materials, and permitting fees.

There are two main types of construction loans in South Carolina. A construction-only loan, as the name suggests, is only for the costs of the construction period itself and must be paid upon completion of construction. With this type, you may be able to take advantage of lower interest rates as the lender assumes less risk.

A construction-to-permanent loan also funds the construction of the home, but it later converts to a permanent mortgage loan when the home is completed. During construction, you would make interest-only payments, and interest rates are locked in. Once construction is completed, you will have to negotiate a second loan (mortgage), but the advantage is that it allows you to pay only one set of closing costs.

There are many reputable lenders out there that can assist with getting you qualified for your new construction loan. The Nationwide Home Loans Group is an option that’s available in 47 states (including South Carolina) and offers 15 or 30 year loan terms. They also offer low interest rates and have low down payment requirements. GO Mortgage Corporation has experience with government-backed loan programs and also has low down payment requirements.

A few more options for South Carolina residents or those moving here are South Carolina Federal Credit Union, TD Bank, and Fifth Third. South Carolina Federal Credit Union is headquartered in North Charleston and offers construction-to-permanent loans. The loan can be used to purchase land, and the approval process involves loan review and builder review. TD Bank has construction loans where the interest rate is locked in before construction begins, primary and secondary homes are eligible, and there are no prepayment penalties. At Fifth Third Bank, fixed rate and adjustable mortgage rates are available. This lender also allows the land purchase to be included in the costs and includes interest-only payments during construction.

Prepare for Mortgage Approval in South Carolina

One of the best things you can do before purchasing a new construction home is to learn a bit about the mortgage approval process and gather all of the necessary documents you might need. Here, we’ll provide a brief overview of what that process looks like here in South Carolina.

1. Pre Approval

Initially, you’ll check with a few lenders who will look through your finances to see if you’re a good candidate for a mortgage. In order to do this, they will require a bit of information and a few supporting documents. You can expect to provide:

• Proof of income and employment (W-2s, tax returns, pay stubs, anything showing income that you earn including rental property)
• Records of assets (checkings, savings, stocks, bonds, investment accounts etc.)
• List of monthly debt payments (student loans, car loans, credit card debt, and other mortgages)
• Records of other expenditures and financial events (child support, alimony, bankruptcy, foreclosure and any other supporting documents)

2. Purchase Agreement

A pre-approval letter from your selected lender is what will show that you’re a serious buyer. Once you’ve chosen the home you want to buy, a purchase agreement is written to confirm the terms of the purchase. This is between you and the seller, or your home builder.

3. Loan Application

You’ll fill out a loan application to officially apply for your home loan. In South Carolina, we use the Fannie Mae form 1003, which is also known as the Uniform Residential Loan Application (URLA). Your Realtor or loan officer can assist you with filling this out.

4. Loan Processing

After your form is submitted, it will go through loan processing where all of the documents and information about you and the home you want to build are collected, verified, and reviewed. If there’s any missing information or additional information needed, the lender will contact you.

5. Underwriting

An underwriter is the final decision maker when it comes to your loan application. They ensure that the documents provided meet the lenders' requirements and guidelines. They also assess your financial risk by looking at capacity (can you handle the payments, credit (do you have good credit and debt repayment history), and collateral (will the value of the property be high enough to use as collateral for the loan).

6. Approval and Closing

Yay! You’ve been approved. The state and all applicable parties will be notified in order to send the final documents to the lender for signatures. Once the money is transferred to the seller (or builder), the deed of trust and mortgage note are recorded at the county office.

This is just a quick overview of what you can expect, so always be sure to ask your lender any questions along the way.

Learning about the different loans and the mortgage approval process will help you understand a crucial piece of the home buying puzzle. Whether you are looking to build a new home or purchase an available home in Greenville, South Carolina, Cothran Homes would love to be your preferred builder. Our communities here offer a sweet, low-maintenance southern lifestyle with plenty of options to build or buy. Take the first step to building your dream home today by contacting us online. We can’t wait to hear from you!