Construction Loans

 

CONSTRUCTION LOANS Q&A

 

How does a construction loan work? 

A construction loan is dispersed to you and your builder in draws (a portion of the loan amount) as your house is being built.  Initially, your amount of money owed is small as is your payment. As you complete more draws and your home nears completion, your amount due increases. However, the payment is interest only (no principal) during construction so it is not a large payment. 

 

Do I have to own land already before I do a construction loan? 

You do not!  You can combine the purchase of the land with the building of the house!  This is a very popular option. If you do own the land (or if there is a land loan on your property), you can use the equity you have in the land as a ‘down payment’ so that you don’t have to come out of pocket with as much cash.  

 

Is it true you need a large downpayment to build a house? 

No, it isn’t!  We actually do FHA, VA and USDA construction loans!  In many cases if you own the land there is very little, if any cash needed. If you are doing a land/house package you can do a loan with a very minimal down payment as well.

 

Are there two closings involved? 

Not usually!   Many of our clients do a one-time close on their construction loan and we simply convert it to permanent loan when your home is complete!  This is a great option and can save you time and money.  

 

How does the approval process work?

We always approve a buyer for their permanent loan before we approve the construction loan so that we have both approvals ahead of starting construction. Then we can simply update your paystubs, bankstatements and re-pull your credit when the house is near completion. 

 

Does the builder have to be approved? 

Yes; if your builder is not already approved with us, we can and will approve them. We have a builder application and get a copy of their license etc…

BRB ITEMS NEEDED FOR BUILDERS APPROVAL

BRB Builder Approval Application

BRB Authorization to Release Information

Do I pay my taxes and insurance as part of my payment? 

Actually on the construction loan, you only pay interest while the house is being built.  When your loan is converted to a permanent loan, we can include your taxes and insurance as part of your payment. 

 

How do I get started? 

Click the ‘Apply Now’ tab in the top left hand corner and fill out the free online application.