Signing contract before getting loan

Beebob · Sep 23, 2009 12:15 pm

I imagine there are a few of us in here who are rushing to get this bloody FHOG in time.

I will be signing my contract this week without my final tender and drawings. Which makes it hard getting a loan. My builder suggested that I take our previous tender to the bank and bring in the final one when it arrives.

Questions

Doesn’t the bank need to value your home before they lend you money? And if I use this tender won’t they only pay for whats on this tender and not anything different to it?

What happens if once I have paid 5% to the builder (required when I sign the contract – I will pay out of my own pocket). The bank undervalues my house and I don’t have enough money to make up the difference?

Can anyone help me on this topic? I am with CBA

Micklou · Sep 23, 2009 12:24 pm

Hi Beebob,

I am by no means an expert in this area but we are also with CBA and our mortgage broker has advised us that it is all about the valuation. For us this determines how much (80%) we can borrow without the mortgage insurance (which in some instances can be quite horrific).

My understanding is that they probably could extend the loan as long as you can service it etc but they will charge you a fee to re-jig the amount.

As I said - not an expert.....

L

ibfragalot99 · Sep 23, 2009 12:39 pm

I'm in the same situation as you BeeBob.

Though I have a tender (Burbank) which has everything on it though I believe there will probably be some extra added later after the land titles and soil test is done (I'm fixed site costs around 8.5k) so any extra I believe I may have to pay myself cash, or ask the bank to adjust the amount.

Theres no final drawings or anything, but generic drawings of the house. I believe this will be enough for the bank to value, and if not they can just wait until we get the final drawings.

You don't need formal approval from bank to sign the contract, just pre approval I'm sure.

kb46 · Sep 23, 2009 12:54 pm

We waited until we had preapproval before signing the contract, but the guy from the bank said we had to have a signed contract before they could issue the loan. They sent someone out to value the place before preapproval. We already owned the land outright so don't know whether that changes things. We now have a loan but still no house plans, although we did have a conceptual plan with the contract. We will have a lot of PC items which will have to be funded from our own pocket if we go over the budget allowed in the contract.

HTH
Kylie

thlo · Sep 23, 2009 1:25 pm

Hi Beebob, yes it does not take too much guessing to know that you are going out on a limb by signing a building contract before you have a bank valuation. Also all conditional loan approvals will have "subject to acceptable property" as a condition.

Having said that this happens quite often although it is not recommended. We often see home buyers applying for a home loan after buying a home at auction.

kkatt · Sep 23, 2009 2:06 pm

Hi Beebob,
We used our first tender to get uncondition approval from the bank.I asked our builder (same as yours) to put in provisional alowance for carpet,tank,septic and then deleted it in our final tender and will get all that done through elsewhere. As for upgrades,tiles,studio m i had a budget and stuck to it,yes we have to pay for these things out of our own pocket but we only got what we could afford. Im happy with what we got.
kkatt ,i pm you more info

Beebob · Sep 23, 2009 2:36 pm

kkatt: wouldn't cba only pay our builder for the carpet, tiles, etc because that is what they valuated?

Our tender is roughly the same price as what I am expecting to lend but there are many items taken out and others put in that will go into our final tender. However we did include tiles, carpet and driveway in this initial tender.

We have also removed this and will get it done ourselves

kkatt · Sep 23, 2009 3:33 pm

Beebob

kkatt: wouldn't cba only pay our builder for the carpet, tiles, etc because that is what they valuated?

Our tender is roughly the same price as what I am expecting to lend but there are many items taken out and others put in that will go into our final tender. However we did include tiles, carpet and driveway in this initial tender.

We have also removed this and will get it done ourselves

We had it as a provisional allowance and our broker told us to give the bank our quotes from the carpet place etc with our builders pak