Construction Loans

Let’s build your dream home together.

Flexible construction financing designed to support every phase of your home build—from groundbreaking to final inspection.

Apply Today

Local Servicing

Your Own Lending Partner

Understanding a Construction Loan

When you apply for a loan to build a home, the lender doesn’t have a complete home as collateral, so qualifying for a loan can be challenging. The lender will want details about the home’s size, the materials to be used and the contractors and subcontractors who will do the work. The general contractor can pull all this information together with their estimates. All contracts must be signed by borrower and contractor.

The bank will not only look at the information above to qualify you, but will also review your credit history and your debt-to-income ratio (this includes all your monthly debt payments plus your mortgage payment, estimated property taxes, Homeowners Insurance and any Association fees) to ensure affordability.

Features of Construction-to-Permanent Loans

Borrow to pay for the construction
Only pay interest on outstanding loan balance during construction phase
Loan balance converts into a permanent mortgage upon completion of construction
Lock mortgage rate at beginning of construction

Typically a 20% down payment is required to begin construction (lower down payment options may be available)
May be able to use land value toward down payment
One set of closing costs and fees

Apply Today

Couple relaxing on couch with two dogs on the floor

More About Construction Loans

Choosing the Right Builder

Find a builder that has built the kind of house you want in terms of price, style and size. Look into the builder’s credentials with the local homebuilders association and ask for references from previous clients. Ask your builder for proof of insurance and check with the Better Business Bureau to see whether there are any complaints against the builder.

Applying for Building Permits

It’s essential that you get the right building permission and the necessary permits required to build your various structures. By getting the right permits, you will avoid fines and work delays. If you proceed to build without the proper permits, you expose yourself to penalties, including having to take the structure down after you’ve built it. The right permits for construction projects will also ensure that safety standards are met. It’s important to adhere to building regulations because these codes are in place for a reason and public safety is one of them.

The method of applying for building and construction permits will vary depending on the state that you live in. You can get all the information necessary at your state government’s website. Leave ample time for the permit process, because it can take weeks or months for your permits to come through. Most lenders will require a copy of your building permits before the loan can close.

Building Progress Inspections

Lenders will conduct routine inspections as the home is built. During this period, the lender pays the builder in stages, called “draws,” and usually sends an appraiser or inspector to make sure that construction proceeds as planned. This process keeps the construction draw amount and completion percentage in line.

Planning for Unexpected Costs

Cost overruns can occur when borrowers change their minds during the construction process or if the price of materials increase. It is recommended to have a 10% overrun budget available.

Subject to credit approval. Certain restrictions apply.