To all of our realtor partners,
Let’s say your client wants a new construction home and they haven’t contacted us for a preapproval yet. Or even worse, they’re working with a broker that's not on the CMG team! Do you know the comp requirements for that new construction depending on the type of loan they’ll be using to purchase? Here are some basic guidelines to follow based on whether they will be using a conventional or government (FHA, VA, USDA) loan:
Conventional
- Must have one comparable sale from within the neighborhood, one outside the neighborhood that is similar, and one additional from either inside or outside the neighborhood.
- Two of the sales must come from a reliable third-party source and not from the builder's data.
- If there are no sales within the subject neighborhood, as long as you have three similar sales outside the neighborhood, you can use two pending sales from within the neighborhood. However, pending sales are necessary; if this is the first house under contract, it won’t work.
FHA
- FHA requires comparable sales from inside the neighborhood, one from outside, and a second from either inside or outside the subject project or neighborhood.
- A loan does not meet FHA HUD requirements without a sale from within the neighborhood or project, and FHA financing cannot be obtained without one.
- Always double-check that there is at least one previous sale in new construction neighborhoods if considering FHA financing.
USDA
- USDA does not have specific requirements for comparables but states that there must be at least three sales that are comparable.
VA
- VA guidelines suggest providing the best comparables available and do not specifically require one to be from the subject neighborhood, though they would prefer it if available.
- For new construction neighborhoods or projects, VA specifies that sales from competing builders should be used when available.
Don’t get caught scrambling the week of closing because the new construction doesn’t meet comp requirements. The best way to ensure a faster, easier, and cheaper closing for your clients is to have them reach out to the Caritas Mortgage Group team.
Garrett Kennell
Branch Manager, Sr. Loan Originator
Lighting the Way to Your Dream Home