A construction loan is a short-term loan that is paid in portions (draws) to your builder over the course of 12 to 18 months. While your home is being built, you are responsible for paying the interest on the amount that the builder has drawn on the loan. Once the home has been finished, the construction loan will be converted or changed into a permanent loan. This is also known as a “construction to permanent loan”.
Interest rates depend on your creditworthiness, the amount of money you need to borrow, type of loan, among other things. Remember, a construction loan is a short-term loan where you only pay the interest on the loan during construction. When the construction is completed, you will then transition to permanent financing.
If you need to buy the land, your construction loan may include its cost. It’s important to know that whether you are purchasing land or already own the land, you can receive credit for land equity.
To renovate your condo, you’ll want to apply for a renovation loan. Construction loans are for building single family homes being used as a primary residence or second home.
Depending on the type of loan and construction method, your home will need to be built within either a 12-month or 18-month term.
The close of your construction loan will pay off any mortgage liens on your land.
Yes. We require a homeowners insurance policy. You will contact your homeowner’s insurance company and place a builders risk policy in force during the construction period.
Yes, there are options available for veterans to build a home. Find more information on the VA construction loans page.
The short answer is no. It’s not required, but a construction loan can help finance the building of this type of home.
A draw will NOT be paid to a builder without verifying that the work has been completed through the draw process. Included in the draw process the borrower must approve the release of funds, an inspection must be completed, and all title updates (if applicable) must be completed.
They operate similarly. A construction loan is used to build a new home and a renovation is utilized to renovate an existing property.
No, you can use any lender to help finance the construction of your dream home.
A 1-time close allows you to close on your construction loan and then at construction completion, modify or automatically convert your loan to permanent financing.
A 2-time close will allow you to close on your construction loan, and then complete a second loan to convert your construction loan to permanent financing.
The qualification process for a construction loan will take approximately 30 – 45 days.
This is up to the borrower, but note that some states may require an attorney review.
Yes, as long as the home is at least a double wide in size.
Absolutely! Different lenders have different levels of expertise with drawing construction loans. Make sure the lender you choose is experienced in drawing your construction method.
Subject to credit approval. Terms and conditions may apply. Property insurance is required on all loans secured by property
