> Of course, most US mortgages are taken out on housing units that actually exist.
To add to that, taking a mortgage for a house that doesn't already exist is a very used practice outside of China, too, I know over here in Romania lots of people do it.
It's called credit for "casa la rosu", basically all you need to show to the bank is a contract between you and the developer and a "registration" thingie for the house in question with the local city-hall (again, even if the house doesn't already exist, in practice). It comes with a price discount (I haven't kept up, I think it's in the 20-30% range, maybe bigger) but, of course, it's all very risky (or at least that's my opinion). That hasn't stopped lots and lots of people from taking those type of mortgages.
I also bought a house recently in very early stages of construction (a year ago, now it is almost finished). In Czechia.
The difference is that the developer must be reputable and the price is actually paid in several tranches, as the construction passes defined milestones. The bank will require independent assessments of the state of construction before approving any partial payment.
But yeah, it is still risky. You need to contribute at least 20 per cent of your own funds as a downpayment, and the downpayment is paid first. I wouldn't dare do that with an unknown developer. I risked it with a corporation that has been in operation since 1998 and has a lot of references.
To add to that, taking a mortgage for a house that doesn't already exist is a very used practice outside of China, too, I know over here in Romania lots of people do it.
It's called credit for "casa la rosu", basically all you need to show to the bank is a contract between you and the developer and a "registration" thingie for the house in question with the local city-hall (again, even if the house doesn't already exist, in practice). It comes with a price discount (I haven't kept up, I think it's in the 20-30% range, maybe bigger) but, of course, it's all very risky (or at least that's my opinion). That hasn't stopped lots and lots of people from taking those type of mortgages.