Hi everyone, we are Bank approved and under contract to build a new construction home.
We’ve been through design center and added a number of upgrades, but we stopped short of everything we wanted due to concerns about appraisal value.
I’m wondering if we can ask the builder for additional upgrades that we will pay for out-of-pocket, does NACA allow that? Is there anything special in how we structure it to be aware of? Basically, we just want them as a line item at closing and not added to the purchase price of the home. We put a sizable builders deposit down that we will get back at closing, and are planning to use those funds.
Unless I misunderstand something specific to NACA, the appraisal requirement is based on the mortgage amount, not the purchase price. With a standard mortgage, if appraisal comes in below the loan amount, the lender requires you to make up the difference in cash – which is exactly what you’re contemplating doing here. It’s also not in a Builder’s interests to build homes that won’t appraise for what they’re selling them for, so if it’s a large or experienced builder, this shouldn’t be a concern. New construction homes are often appraised based on the land/replacement cost of the specific home and the builder provides a detailed plan and list of materials and features, which should make the appraisal easy to match to the purchase price if the builder is charging correctly.
Thanks Baker, from what I’ve read NACA won’t approve a house that doesn’t appraise EVEN IF you can cover the gap in cash. There are posts here on the forum of people applying for an exception in that case, but I’d rather not even deal with that, knowing how slow the back and forth with NACA can be…