Return to the Building a Home Forum | Post a Follow-Up

 o
How do Appraisals Work on Building a New Home?

Posted by Crossfoxx (My Page) on
Sat, Mar 8, 14 at 6:07

Hello

My wife and I are building a home and want to borrow $140,000 to build - the appraisal on the blue prints is $153,000. The bank says we need a down payment of $30,600 and they will loan us $122,400.

Based on what I know, this does not sound right.

My understanding is then we would only need $17,600 for a down payment, and the bank is wrong. We still only need $140,000 to build, but the bank says we have to make up the difference to the appraised value. ($153,000 - $122,400 = $30,600)

The bank is telling us that had we received a lower appraisal, closer to $140,000 that we would have had a lower down payment.

I've never heard of it working this way....any information on how this works would be appreciated.

Thanks

Steve


Follow-Up Postings:

 o
RE: How do Appraisals Work on Building a New Home?

The bank is always right. It's their money.

Do you have a healthy contingency fund factored in also? You're going to need one. Especially with that lowball price. Everything you want will be an upgrade.


 o
RE: How do Appraisals Work on Building a New Home?

For construction loans, you need 20% Think how much riskier these loans are for the bank. They could be at 122K before any of the interior finishes are even started just from a few materials/labor items increasing during the construction period. That leaves them with a house that they can't sell without loosing money.

How did you come up with $17,600? That is about 9% of the appraised value.


 o
RE: How do Appraisals Work on Building a New Home?

The bank believes the house will end up costing you $153,000 to build. They require 20% for a down payment, which is how they came up with the $30,600. ($30,600 is 20% of $153,000)

In order to borrow $140,000 you would need to be building a house that would cost $175,000 and you would need a down payment of $35,000.

How much did you think the house was going to cost to build? How much do you have for a down payment?


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Building a Home Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here