Getting a construction loan to build your very own custom home from the ground up is a little different than buying an existing home. We have the perfect construction loan solution to help you make your dream home a reality.
What To Consider Before Getting A Construction Loan
Use a qualified builder
Anyone less than a licensed general contractor with a proven track record will make getting a loan harder. If you’re acting as your own general contractor, you may have additional requirements to prove you’re qualified for the job.
Get an appraisal
How do you appraise something that doesn’t exist? Most likely, you will need to have an appraiser consider any specs or blueprints of the house, in addition to the value of the land. They compare that information to similar homes in similar locations and determine the value from there.
How do construction loans work?
A construction loan allows homebuyers to finance the lot purchase and construction costs to build their home. When the project is complete, the borrower can transition their construction loan into a traditional mortgage.
Unlike a traditional home loan, a borrower won’t receive all the funds at once. Instead, the builder/contractor will be paid by the lender in a series of draws based on the project timeline.
How much construction loan can I afford?
The size of a construction loan you need depends on the cost of the land, construction costs, and your down payment amount. As with traditional mortgages, interest rates will also factor in to how much construction loan you may afford.
How To Get A Construction Loan With No Money Down
Similar to traditional mortgages, qualified borrowers may be able to get a construction loan without having to make a down payment. Certain VA and USDA programs offer zero-down construction loans* that can help homebuyers finance their home construction without the hurdle of a down payment.
What is an interim loan?
Some lenders offer an interim loan to help borrowers finance home construction projects. Typically, interim loans are short-term and are meant to bridge the gap between building and permanent financing. To make your homebuilding simple, PrimeLending offers construction loan products that roll your construction financing and mortgage into one loan to help you save time and money.
What is the difference between a construction loan and a regular loan?
Unlike a regular mortgage that covers the cost of your home purchase, a construction loan includes a short-term loan for construction, disbursement of draw payments, and (depending on your loan) higher interest rates. We offer a streamlined two-step construction loan process.
First, you get a temporary loan to start the project. Then, once construction is complete, we’ll refinance your initial loan into a traditional mortgage at the most favorable terms possible. Here are just a few benefits that we provide to make the process smoother:
- We’ll lock the interest rate for your second refinance loan up to 12 months. This protects you against rate increases, and the lock fee will be refunded when the loan closes.
- Your first loan will come with a fixed rate and you only pay interest on money used for construction, not the entire loan amount.
- When you refinance your initial loan to your regular home mortgage, you’ll receive closing cost credits.
Finance Your New Construction Dream Home
From deciding where to put light switches to picking out colors and appliances, you’ll have plenty to think about. So, we’ll take any concerns about financing off your mind. We strive for fast, efficient closings** and low hassle document collection and submissions. We also promise to support and keep you informed throughout the entire loan process. Every step of the way.
You Can Build a Home Like No Other.
