October 4, 2012

Understanding New Home Construction Loans

Filed under: Real Estate — Chuck @ 5:01 pm

In August the building industry reported a surge in new construction permits, as the housing market continues to regain the momentum it lost over the past several years. Consumers wanting to build a home can take advantage of incredible mortgage pricing, snagging interest rates that are the lowest in history. Then they can leverage that financing to buy homes that are still bargain priced, because builders are still hungry for work.

But financing new construction can be a little confusing, even for people who have lots of experience with buying and selling preexisting home. New construction loans don’t work quite the same way that other more conventional mortgages do. So if you want to know your options when it comes to new home buying, it helps to get an overview of construction loans and how they can be structured.

Builder versus Bank Financing
Many builders and construction companies offer home buyers in-house financing. This can be a great option, as long as the terms of the loan – including the interest rate, down payment, and monthly payments – fit your financial goals.

Builders may have their own network of lenders, such as private loan specialists. But consumers should realize that major banks, savings and loan companies, and traditional mortgage companies can often more competitive rates. You should do everything you can to bolster your credit rating and then shop around, being sure to crunch the numbers to do accurate side-by-side comparisons.

Loans for Construction Only
Once you decide on a lender, you’ll have some choices of loan products. You can use a construction-only loan if you just want to borrow during the period of time while your home is actually being built. Most of these cover a fixed period of time, outlined in the loan contract, and they usually involve variable, short-term interest rates. While a rather typical period of time for a construction loan is six months to a year, you need to make sure that you have enough time to finish the home. Unexpected delays can cause big problems, because if your home is not ready but the financing expires you’ll have to finish repaying the loan before you are able to enjoy your home. Since the home isn’t ready to inhabit, traditional lenders not be able to offer you a conventional mortgage to cover it, and you might be stuck between a rock and a hard place.

Construction Loans that Convert into Mortgages
That’s why lots of borrowers instead use a different type of loan that starts off as a construction loan but gives you the option to then turn it into a normal mortgage. Whereas you can use a straight construction loan to build and then pay off that loan with a new mortgage loan (paying two separate closing costs) with a “wraparound” construction loan you’ll only have to pay closing costs once. The loan is structured so that as soon as the construction is done your loan turns into a mortgage, with the new home used as the mortgage loan collateral. Regarding your interest rate, that is typically set up front, when you break ground and start building. So if you think that rates are going to fall significantly between the time you start building and the time that you are ready to borrow against the home with a mortgage, you might be better off using two loans. But if you aren’t concerned about getting locked into an interest rate several months ahead of time, a loan that wraps may be the best and most affordable solution.
Sticking to the Schedule

Usually the lender draws up a borrowing schedule so that money is loaned in increments as phases of construction are finished. If you get too many delays it could cause you to miss an agreed-upon deadline with the lender, who may then want to raise your interest rate. When construction gets too far behind homeowners sometimes have to do a completely new loan application, too, with fresh documentation. So before you sign on the dotted line, make sure you have all your ducks in the row and can rely on the builder and lender to meet your timeframe.

Homeowner Tips: What you need to know about foundation warning signs.

Filed under: Home Owner Tips — Chuck @ 5:00 pm

Anyone who has ever built a sand castle on the beach knows that once your foundation is compromised, the end is near for the whole structure. The same goes for homes. Foundation problems are one of the most serious issues that can befall a homeowner, and everyone should be aware of the warning signs and symptoms of foundation trouble.

Some homes rest on pillars or on top of piers and beams. Others sit on top of concrete blocks or a perimeter wall made of stone or cement. Then there are homes build on top of a slab that was poured in place on the ground before the home was built. But what every home has in common, no matter how it was constructed, is that foundations are sometimes susceptible to damage.

Early Warning Signs
When a foundation shifts, it can cause warping and twisting throughout the house. If your doors and windows used to open and close easily but they suddenly get jammed, it might be due to humidity swelling their frames. Or it could indicate something more serious and permanent. Are there spider-web looking cracks around the corners of windows or doors? That can be a telltale sign of foundation damage. One good trick to remember is to take a golf ball with you. Set it in the middle of the floor, and see if it starts to roll.

Homes that are straight and level usually won’t cause a golf ball to take off and wobble across the room, unless the floor just happens to be poorly laid and uneven. But if the foundation is out of kilter than oftentimes causes the floors to buckle or tilt. You can’t tell much by doing the golf ball test, and just because your doors stick or you have cracks along the walls that doesn’t necessarily mean you have foundation trouble. But these are simple signs that should alert you that you need to call in a professional to give the house a closer look.

Protecting Your Foundation
There are lots of geological things that can happen underground to disturb your foundation, too. Soil expands when it gets wet and then shrinks when it dries out, for example, and that can cause it to shift and move. You might wind up with a void in the ground where earth fell away. Water can seep down beneath the foundation and either float it out of alignment or freeze and cause a crack or break.

The material used to build the foundation – such as concrete – can lose its integrity and strength. The mortar work supporting a house can be weakened over time, or the ground can shift and unsettle the foundation due to natural causes such as earthquakes. The bottom line is that it always pays to monitor your foundation and keep an eye out for anything suspicious going on that might indicate a problem brewing down below.

DIY Inspections
Once or twice a year – perhaps in spring and fall – you should walk the perimeter of your home and study the foundation, looking for any cracks or breaks. Check to make sure that when it rains the water drains away from your foundation. If water instead flows toward it (or just puddles against the house) that is not a healthy sign, because water can erode your foundation. When you find the soil upheaval or holes around the foundation that may also indicate that when it rained the soil was removed or displaced.

Keep plants and bushes far enough from the foundation that you can squeeze between them and the exterior wall of the house. If tree roots are tunneling under the house, you should talk to a foundation specialist and an arborist and figure out the best solution before the roots damage the foundation. To be on the safe side it is also a good idea to hire a professional to do a good visual inspection of your foundation every few years. In the meantime if you see any signs of vulnerability have it looked into right away, before a potential problem can worsen.

October Homeowner To-Do List

Filed under: Home Maintenance — Chuck @ 4:58 pm

Across most of North America the weather is starting to get a little cooler, and by the end of the month many regions will have frost. Before you know it the temperatures will plunge, so October is your last chance to do many of those routine homeowner projects before they become really bothersome or impossible tasks. Don’t postpone them or else you’ll either have to deal with them when it’s a lot more challenging or you’ll be tempted to delay them all the way to spring. Both of those are unwise strategies, and to help give you a jump start here is a suggested to-do list.

Plants and Landscape
First make some room for those plants that you want to winter indoors, because if you forget and they get hit by an early frost you’ll likely lose them all.
Then get busy planting your bulbs that you want to have blooming in springtime. They’ll be underground and out of sight all winter, but will give you a beautiful blooming head start when the weather warms up again. Bulbs like daffodils and tulips need to get into the ground soon, though, while ground temperatures are still around 60 degrees or higher.

As trees and shrubs start to shed their leaves you can cut back on watering them. But if you are planting evergreens this fall you’ll want to water them sufficiently while you still can, before the ground freezes.

Do your autumn lawn fertilization, and use an aerator to break up the soil and stimulate healthy root development. You don’t want to keep trimming your hedges, either, because trimming causes them to sprout new growth. That new growth can be zapped by a freeze, and that can, in turn, take a toll on the entire plant.
Pruning should usually be done after plants go dormant. That’s a good time to cut back limbs that are hanging over the roof and to cut back bushes that are touching your home’s exterior. That helps avoid wood rot, termites, and other problems that can occur when your foundation is crowded by growth.

Windows, Doors, and Ventilation
One great project to put on your fall to-do list is to have your garage door inspected. You want it to be in good working order with all the hardware intact and lubricated before frigid weather hits.

You should also look for gaps around your windows and caulk those. But if you want to really tackle the expensive energy loss that happens when heated air escapes over winter you might consider a window upgrade. There are many energy efficient kinds of windows that can dramatically reduce your energy costs, and the sooner you invest in them the quicker they’ll start to pay you back.

Water and Drainage
Clean those gutters, otherwise you’re asking for trouble when water turns to ice and can create a wedge that damages roofing, siding, or trim. If you don’t already have downspout extensions, those are an easy and affordable upgrade. Install ones that redirect the water from gutter run-off at least a yard away from your home’s foundation.

Once winter is on your doorstep you should disconnect and drain your garden hoses, too, otherwise they may freeze and split. If you have an in-ground sprinkler system you can have a service contractor some out and professional drain it for you, to protect that system.

Other Miscellaneous Chores
If you have any pipes to put in the ground or other projects that require digging, try to do those before the ground freezes. You should also use autumn to seal or reseal your deck. That will protect it from water and ice that can do serious damage across wintertime. Be sure to properly insulate all of your pipes, especially in basements or garages that are not heated, so that they won’t freeze and rupture in the dead of winter.

Deck Safety: Are you lounging atop a disaster waiting to happen?

Filed under: Home Safety — Chuck @ 4:56 pm

Film director Alfred Hitchcock made a name for himself by creating movies that scared the living daylights out of people. But instead of conjuring up fantastic scenarios with larger-than-life monsters and villains, Hitchcock had an effective knack for taking ordinary, everyday events and turning them upside-down to make them terrifying. You may have seen in recent months how that kind of Hitchcock style horror unfolded in real life for people who were posing for photos on a prom night or wedding day when their decks collapsed.

The potential for that to happen to anyone who owns a deck is so great that CBS even ran a special news feature about deck maintenance and safety. So here is some information to help you understand the issues surrounding decks and their structural integrity in order for you to ensure that yours isn’t going to pose a problem.

Here are some of the weak links in deck construction to beware of and keep an eye on as your deck ages and weathers.
• Corroded hardware.

One of the biggest culprits is corroded hardware, so that’s the first place to look for trouble. Many decks are made with connections, fasteners, and bolts that are not capable of withstanding years of exposure to the elements.

• Nails or screws.

If your deck is held together by nails and screws – no matter how sturdy, long, big, or strong they appear to be – you are probably already in the red zone in terms of a structural hazard. There is an extraordinary amount of weight and pressure on these vital fasteners, and as they corrode or rust they lose their strength. All decks should instead be held together with heavy duty bolts properly installed and rated for heavy duty service through years of inclement weather.

• Rotted wood.

Although your deck may appear to be in solid shape, wood boring insects or moisture being wicked into the wood from the atmosphere could be attacking it and created rot. You can do a visual inspection yourself, looking for telltale signs of rot. You may also want to tap along the wood with a mallet and listen for signs of softness that indicate internal decay. But with your family’s safety on the line it is wise to skip the do-it-yourself approach. Hire a pro who can do a careful evaluation and either give your deck a clean bill of health or recommend appropriate remedies where rot is a potential hazard.

• Inadequate foundation.

Even when the deck above ground is solid as a rock, it could be in danger of crashing to the ground if it is build atop an unstable foundation. Sometimes homeowners erect a deck on top of an original foundation, for example, but then later add more weight by adding additional deck features. But an experienced engineer, inspector, or contractor who is familiar with load-bearing foundations can do some tests to try to be sure that the foundation is sturdy, level, and adequate.

• Unstable railings.

Unstable railings are always an accident waiting to happen, no matter where you find them. If you have a deck railing that’s getting a little loose or shaky you are just inviting danger and problems. Don’t procrastinate. Railings need to be repaired immediately, before you use the deck again, because until they are fixed someone could take a bad tumble.

• Railings that are set too low.
Low railings are another problem on some decks, especially those designed without proper attention to building safety codes. People hanging out and enjoying themselves on your deck will tend to lean against the railings, which is only natural. But if the top of the railing or banister hits them below the waist it can be really easy for them to lose their balance and fall overboard.
Sometimes the biggest threat to your home and family isn’t the kind that you avoid by putting up a taller fence or installing a better burglar alarm. While you are relaxing on your deck you could be actually flirting with potentially lethal danger. That’s because decks that have not been inspected within the past 10 or 12 years could be ticking time bombs. If your deck is nearing that age – or if you aren’t sure how old it is or when was the last time it was inspected – do yourself a favor. Call a qualified contractor or a trusted building inspector. For a nominal fee they can check it out and make sure it’s ship-shape. That will give you peace of mind and added security, and it might prevent exposure to huge liability, serious injury, or an outcome that is even more tragic.