A Financial Timeline of Building an Atmos Home
Buying and financing an Atmos home is different than applying for a traditional mortgage—here's what you're expected to pay and when.
Building an Atmos home can feel daunting but think about it this way: it's an amazing opportunity to put the money you would have spent on a conventional, already built home into one that has everything you've always wanted for you and your family. While buying and financing an Atmos home is slightly different than applying for a traditional mortgage, it helps to know exactly what you're expected to pay and when. The following is an overview and timeline:
Step 1: Pre-approval
Apply for pre-approval of the total amount—this also includes a loan estimate, which gives you an estimate on taxes, insurance, and closing costs.
Step 2: Atmos Deposit
This deposit amounts to 1 percent of the estimated build value (discovered during the pre-approval process) and is capped at $5,000. It is held in escrow and accounts for lot due diligence, the home design process and all the work Atmos performs until the pre-construction close.
Step 3: Land Due Diligence and Earnest Money
These two deposits are paid to the land owner: the land due diligence is paid when your offer on a lot is accepted, is non-refundable but can roll-over towards the downpayment (it's generally from $500-$1,000); earnest money is refundable and can roll-over towards the downpayment (it amounts to 1 percent of land costs). These are held in escrow until you close (move in).
Step 4: Pre-Construction Closing
Before construction begins, it's time for your full down payment—whatever amount you've chosen (more on down payments below). Your original Atmos deposit is added to the amount and it includes the closing costs like title insurance, taxes, and loan origination fees (lender fees).
Step 5: Move In
You're almost there! During the post construction closing you'll sign the final documents and pay the last taxes that means you're ready to move in. If you still own a home, this is when you sell it to potentially roll-over equity into your new home.
Great! How do I get started?
To move forward with your Atmos home, all that's required is the deposit (1 percent of the estimated build value—up to $5,000) while we work with you to design the home you want. You'll have the land due diligence and earnest money deposits along the way, but the next big payment will be your remaining downpayment in 3-4 months—so start saving now!
Additional Info:
Here are a few other terms that may come up in your homebuilding journey
Construction to Permanent loan:
A construction to permanent loan (mortgage) is the typical loan required to build a home. Luckily with our partnered lender, you only need the one as it will rollover into a typical mortgage when building is finished. You'll need to do another credit check to make sure nothing has changed in the year since your credit was last pulled for the construction loan. You'll need at least a 5 percent down payment and won't need to pay for mortgage insurance until the build is done.
Note: This is typically applied for by folks that already own a home and will be transferring equity or using their current home value toward their down payment.
Jumbo (Nonconforming) loan:
A jumbo loan (mortgage) is financing that exceeds the limits set by the Federal Housing Finance Agency (FHFA). Unlike traditional mortgages, a jumbo loan is not eligible to be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac, so the application and requirements are more rigorous. A jumbo loan requires a stellar credit score, a very low debt-to-income ratio and a minimum of 10 percent down payment. It also comes with a higher interest rate and the need for mortgage insurance unless you're able to put down a 20 percent down payment.
Note: The current jumbo loan limit in most of North Carolina is $548,250, though it may be higher (up to $625,500) in some counties. Keep in mind these rates can change annually.
Down payment:
The exact amount of the down payment has been varying lately—we've seen as low as 5 percent and even, over the traditional 20 percent! The amount you choose affects how much you can borrow, your interest rate and your monthly mortgage and whether you'll need to pay for Private Mortgage Insurance (PMI)—so we suggest going as high as you can. Luckily, due to the nature of the homebuilding process, you can wait to put down a larger payment after construction is done, which allows you a little more time to save up as much as possible.
Note: If the total cost of your home is below $700,000 and you can put a 20 percent down payment you'll be below the jumbo loan threshold.
Private Mortgage Insurance (PMI):
A type of mortgage insurance you might be required to pay—especially if you cannot make a 20 percent down payment. While PMI can help you qualify for a larger loan, it may increase the overall size and cost of your loan. It also doesn’t protect you if you cannot pay your mortgage, as it is meant to protect the lender.
FAQ:
Can I get pre-approved directly on your website?
Yes! Our partner lender can conduct a credit check to verify your approval amount in about 1 business day. Please note: this is a hard credit check and will decrease your credit score by around 5 points. Read more about how to finance your home with Atmos in our blog post.
Can I work with my own Lender?
Yes, you can work with your own lender then upload the appropriate pre approval documents through our website to ensure we have your correct budget and paperwork. Read more about how to finance your home with Atmos in our blog post.
If I already got approved for a traditional mortgage, could I use that instead?
If you've been pre-approved for a traditional mortgage within the last 90 days, we'll just need to get you approved for a construction to permanent (CP) loan if your lender does not do them. Otherwise you'll have to reapply for a CP loan
Traditional mortgages are different from lot and construction to permanent loans, which are what’s needed to build a custom home—a lot loan helps you pay for the land and the construction to permanent loan helps you pay for the build. Therefore, you will need to be approved for either or both before moving forward. Read more about how to finance your home with Atmos in our blog post.
Should I sell my current home?
It depends! Selling a home involves a wide array of outside factors, many of which can be difficult to plan in advance. Though there’s no perfect solution, here’s what you ought to consider when building a home and selling one at the same time: your timeline, the housing market, and your financial situation. Read more of what we recommend in how to sell and build your home at the same time.
Is there a security deposit?
Yes. Once you select your lot, a floor plan, and are pre-approved, you would then pay 1 percent of the estimated build value (capped at $5,000) that goes towards the cost of building your home. This money is used to purchase your floor plan and to conduct diligence on your lot including a survey and soil test. Read more about how to finance your home with Atmos in our blog post.
Do I pay you directly or the builder?
Your lender pays the builder at certain intervals known as a draw schedule—defined in proportion to your building schedule. For instance, once the initial foundation is laid, 10% of your total loan amount would be disbursed to the builder. These draws would occur all the way up until the house is complete—at which point the remainder of your loan is disbursed to the builder.
What does my credit score need to be in order to build?
In order to qualify for the conventional construction to permanent loan through our partner, we recommend a minimum credit score of 680 with a 5% down payment. For the Federal Housing Administration (FHA) loan and the Veterans Affairs (VA) loan, we recommend a minimum credit score of 680 with a 3.5% down and 0%, respectively. If your credit score isn’t where it needs to be, here are a few suggestions to improve it.
Is my deposit refundable if I cancel?
The deposit is refundable up until your offer on your lot has been accepted—minus any expenses incurred at that point (for example, on your home plan).
What do the fees cover?
The fees cover the cost of obtaining plans (architectural and structural engineering), survey, plot plan, soil test, interior design fees, 3D rendering during pre-construction, Matterports during construction, third party home inspections, and your full time project manager from beginning to end.
