Construction Loan Overview

 

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  On Line Construction Pre-Qualification

Building You Dreams Takes Time...
Building Your Dream Home Takes Money

A sound financing strategy is the foundation for your home building plans. And a construction loan is your blueprint to navigating all phases of the building process.  It lets you take financial control of the whole project, and because you're the borrower, it's you - not the builder - who benefits from the tax deduction.  In fact, from start to finish, a construction loan can help you ease the way to building your dream home.

Laying The Groundwork

No matter where you are in the design and planning process, we'll help you develop just the right financing program.  And because we realize that every homeowner is different, we have access to a wide variety of products and services to create a strategy that suits your overall financial situation.

Depending on the financing on the financing options you select, you may be able to borrow up to 95% of the combined value of the cost of your land and the cost to build.  You can get help financing the land too, if construction begins within 30 days.  Or if you already own your land, its value can be used to determine the total equity available for your down payment (none may be needed).

Constructing The Ideal Loan

Before the closing/ settlement on your construction loan, your account will be established and your draw schedule set.  During construction on your home, you just have to make interest-only payments each month on disbursed dollars.  You don't pay interest on the total amount of your construction loan until after the final payment is disbursed and the house is completed. 

In  most cases (not all), you will be required to use a general contractor to ensure that construction on your home is completed on schedule.  Also, you may need to have your builder approved to meet the standards of the financial institution (usually not a problem).

Once construction is completed, there's no need for another closing/ settlement (with certain  loans, you may be required to sign a "Modification Agreement".  Some third party fees may apply).   And no additional mortgage lender fees are required when you convert your construction loan to a permanent mortgage! * 

*However, be prepared for a much larger Real Estate Tax Bill or assessment after your home is complete.  Upon conversion to permanent financing, we will establish an escrow account for your loan.  You may be required to make an initial deposit to your escrow account to maintain sufficient funds for payment of taxes and insurance as they become due.  For this reason please plan ahead for this deposit, and prepare for a future payment at conversion to include tax and insurance monthly escrow payments, this will increase your monthly payment.

Building Your Dream

No matter what size home you're building, we realize you're building your dream.  In addition to new home construction, we can help you find financing for major renovations and for modular or pre-cut homes.   Call or email us today and let us work with with you to find the financing plan that makes you feel at home!

Financing Your Home From Start To Finish

1. Application Process

You and will complete an application package which will be processed along with construction related documents including information on your builder, the construction contract, and two sets of plans and specifications.

2. Approval

Within 24-48 hours (typical turn around time) of receipt of the completed file and all necessary construction documents, a loan decision will be made and communicated in writing.  (We Pre Qualify you at the beginning of the loan process, if it does not look good, we make you aware of what we see as potential underwriting problems before you spend money on credit reports, appraisals, etc.) 

3. Closing

Your closing documents will be prepared and sent to the approved settlement agent.  Part of the mortgage account may be advanced at the closing or funding to help finance land acquisition, pay for any work already completed on the property (in some areas work cannot begin prior to closing), or provide purchase money for an existing home with proposed renovations.

4. Construction Period

While you home is in the construction phase, you will be required to provide acceptable proof that you have paid your real estate taxes and homeowner's (or builder's risk) insurance.

Advances (Draws) are made according to a prearranged schedule.  A Foundation Survey is required before any advances for work in place can be made.  It is also required after the foundation is installed.  The builder usually supplies this survey and the final survey, but ask...   A land survey will be required if you purchase the land at the same time you close on the construction loan, a builder does not usually supply the land survey. 

Before each advance, the following items will be obtained by the lending institution: site inspection documenting work in place, title update,  and lien waivers; along with any other documentation required, if applicable. 

You will be billed monthly for "Interest Only" based on the amounts advanced to date throughout the construction period.  The interest rate during the construction period and the length of time allowed for construction (2 to 12 months) will be determined by the loan program. 

 5. Completion Date

Once the construction is 100% complete per plans and specifications and a Certificate of Occupancy, or local equivalent, is provided, a final inspection is carried out by the original appraiser.  An "As Built" final survey is required at this time along with the final title update, if applicable.

6. Conversion to Permanent Financing

Upon completion on construction, the "interest only" payment will be converted to a "principal and interest" payment for the remaining term of the mortgage based on the program selected.*

*However, be prepared for a much larger Real Estate Tax Bill or assessment after your home is complete.  Upon conversion to permanent financing, we will establish an escrow account for your loan.  You may be required to make an initial deposit to your escrow account to maintain sufficient funds for payment of taxes and insurance as they become due.  For this reason please plan ahead for this deposit, and prepare for a future payment at conversion to include tax and insurance monthly escrow payments, this will increase your monthly payment.

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