Buying A New Condo? Use A Preferred Project Lender
Senior Vice President
Loan Originator ID 316243
The new condominium projects emerging in urban Honolulu are generating much buyer excitement in a high-demand housing market. Many of these new condos feature the latest in design and functionality, and are conveniently located between downtown Honolulu and Waikiki, offering easy access to the freeway and airport.
New condominium projects usually take a couple of years before residents can call them home, from groundbreaking to completion. Buyers often have many questions on how the mortgage process will flow during this extended timeframe.
For starters, most developers have a preferred lender working with the sales team at the project sales office. The lender is on-site to help with financing scenarios and loan prequalification. It is usually advantageous for buyers to work with a preferred project lender since that lender will have the most knowledge about available financing options for that specific project.
Once prequalified, a buyer will be able to move to the unit selection process. There are still several steps before a buyer can seal the deal on the condo purchase. After unit selection, the buyer needs to make an escrow or reserve payment, which holds the unit while the buyer reviews the condominium documents. After the review and acceptance of the documents, the buyer can sign the binding purchase contract. At this stage, the buyer will need to provide the sales agent with the last escrow installment deposit. These combined escrow deposits vary among projects. You can expect a range of 10 percent to 20 percent down to reserve your condo while it is being built.
How can you be prequalified for a future condo project? The project lender will usually qualify buyers using an interest rate that is one to two points higher than current market rate. This is a necessary precaution for the developer and the buyer alike to ensure that the buyer’s ability to purchase can withstand fluctuations in the interest rate market during the construction phase. Another key reason for this rate spread is many new projects have sales contracts that are not contingent on a buyer’s ability to qualify for financing.
Buyers will need to provide current pay stubs, tax returns, bank statements and documents that support additional income and assets. A credit report will be ordered. It is very important to avoid new larger debt or negative marks that can result in a lower credit score. If anything happens that can adversely affect income or assets during the construction phase, it is important to inform the lender immediately so a remedy can be pursued.
There are several other advantages of using the project lender for a condo purchase. The lender will have direct communication with the developer on confirmation of closing dates, deadlines and extended lock programs. Typically offered within a year of the estimated condo completion date, an extended lock program can protect buyers from interest rate fluctuations. In addition, if interest rates drop near the completion of the project, buyers will be offered an option to “float down” and select the lower interest rate.
As Hawaii’s largest locally owned mortgage banker, Honolulu HomeLoans is currently a preferred project lender on many active condo projects including Ke Kilohana, 801 South Street, Building B, Keauhou Place, Symphony Honolulu, The Collection, Anaha, and The Commodore. We have recently financed completed condos including Waihonua at Kewalo, The Cove Waikiki, Rycroft Terrace, and 801 South Street. The team at Honolulu HomeLoans has more than 20 years of experience as a project lender in Hawaii. Please call (808) 681-7500 or visit our website at www.honhl.com for any questions and assistance on your purchase and refinance needs.