Fix financing early – no room for negotiation with the home builder?

Hello house construction forum,

I have a question for the financing experts among you:

At the moment, interest rates are rising again and I would prefer to finalize financing next week. Unfortunately, my house builder (general contractor) is not yet ready to send us the completed house construction contract and the finished description of construction services – so far we have only received a sample contract.

However, I want to have the house construction contract reviewed and adjust some passages.

So far, we have the following documents:

[*]A detailed cost breakdown as Excel (which is probably already about 95% accurate)
[*]Floor plans
[*]Elevations
[*]Site plan of the house on the property
[*]Draft of the notary contract (to be sent to us in the next few days, from then the 14 days start)

We do not yet have

[*]Living space calculation, calculation of enclosed volume
[*]Section of the house, elevation
[*]Construction contract, description of construction services

Is it sensible to secure financing now and provide further required documents later? A friend who is building in the same new development did it this way.

I see the following problems:

If the financing has already been signed and the floor plans and cost breakdown have been submitted, I can no longer build with another company, right? That means the house builder would have no reason to make concessions during contract negotiations because I am already bound to his company, correct?

Is it realistic that banks will approve the loan if we do not yet have a final construction contract?

What would you do?

Sign financing as quickly as possible now or rather wait 1-2 more months until all documents are finalized and the contract has been negotiated.

What would happen if no house construction contract is concluded with our house builder and we have to find another company with the existing financing?

I am grateful for all answers!

Kind regards

At the moment, interest rates are rising again

Well, the actual increase took place already about seven months ago until around the end of June. After that, it went down a bit again from a very high level.
Currently, there is no new interest rate increase. Just a sideways movement (+/- 0.30% I consider no change).

What would happen if no house construction contract is concluded with our house builder and we have to find another company with the existing financing?

Then you have to accept the financing and build with someone else or compensate the bank. The big problem I see with you is that you currently have a pig in a poke. An offer is only worth as much as the construction performance description that belongs to it. Depending on the scope, considerable additional costs can arise for you, e.g., elaborations, but you should take these costs into account.

Then you have to take over the financing and build with someone else or compensate the bank.

Can I then also use the financing for another house from a different provider? The problem will be that I won't get the same house for the same money, the bank won't like that.

The big problem I see with you is that you currently have a pig in a poke. An offer is only worth as much as the construction service description that goes with it. Depending on the scope, considerable additional costs can still arise for you, e.g. development, but you should take these costs into account.

We have a pretty detailed Excel list (15 pages) that lists all materials with prices. Including the foundation slab, earthworks, construction site setup, construction electricity, etc. The sample construction service description refers to this cost breakdown so that it becomes part of the contract. Therefore, there shouldn’t actually be any big price surprises?

Would you communicate to the house building company that I already have financing for the project, or would that diminish my bargaining power in the contract negotiation?

Can I then also use the financing for another house from a different provider? The problem will be that I won’t get the same house for the same money, the bank won’t like that.

We have a pretty detailed Excel spreadsheet (15 pages) listing all materials with prices. Including the base slab, earthworks, construction site setup, construction electricity, etc. The model construction service description refers to this cost breakdown so that it becomes part of the contract. Therefore, there shouldn’t really be any major price surprises?

Would you communicate to the house construction company that I already have financing for the property, or does that diminish my bargaining power in the contract negotiation?

Since the bank evaluates each construction project, I would say that you can’t just choose another provider.

There can be many price surprises, starting with possible price increases. Do you have a fixed price guarantee? Material escalation clause? Is disposal included in the earthworks? Have you considered costs for utility connections? Is a multiple-utility entry included? There are many points that are often not included in the construction service description.

Is it realistic that banks will guarantee us the loan if we do not yet have a final construction contract?

Ask your preferred bank. Some will certainly be happy with just the floor plan and elevations at first. The rest can be submitted later. But who knows what your bank wants?

Should I sign a financing agreement as soon as possible or rather wait 1-2 months until all documents are finalized and the contract has been negotiated?

I recently read that interest rates have dropped a bit. So everything is still open for you: they could be lower in a month. So: wait! …for the course of life ;)