Everything you need to know about construction loans

Choosing to build your own home is a big decision. From finding a lot to build on, to designing the home, to the actual construction, there’s a lot of moving parts. Another thing you’ll need to spend some time considering is your construction loan. What are your options, how do they work, and what can you expect? 

Your Construction Loan Options

We offer One-Time Close & Two-Time Close Construction Loan options, both options have their own pros and cons. We also offer a home renovation loan option for those looking to upgrade their home, but we won’t be discussing that here.  

One-Time Close

  • As the name suggests, this loan only closes once, meaning the financing for both construction and the mortgage are included in one loan.  
  • You’ll only have to submit an application once and pay closing costs once, saving you money and time. 
  • One-Time Close loans are less risky because you have already secured permanent financing before the construction begins. 

Two-Time Close

  • Again, the name gives it away, but a two-time close requires two loans, one for the construction, and one for permanent financing. 
  • Because you’ll be closing a new loan after the construction is completed, you have a chance of obtaining lower rates. 
  • There is more risk involved with a two-time close loan, however, this usually is accompanied by lower rates. 
  • With a two-time close, you have flexibility in which loan program to choose for the permanent financing. 

How Construction Loans Work

During the construction process, your home builders will receive funds in installments called “draws” when each phase of the build is completed. At this point, an onsite inspection will take place to verify the approximate cost of that phase of the build and confirm that the build is progressing in a timely manner. Once established, your builder will receive a reimbursement on that phase of the build. This means that either yourself or the builder must have enough funds to cover the construction phases initially, since you will not receive the funds from your loan until the phase is completed. 

What You Can Expect

  • Flexibility: We offer 6-Month, 9-Month, and 12-Month loan terms.  
  • Minimum of 5% Down Payment: We allow as low as 5% down payment for those who qualify. 
  • Draws Directly to Builder: We have an experienced construction team that will release draws directly to your builder, so you don’t have to worry about playing middleman between your lender and your builder. 
  • Build what you want: Owner-occupied, second home and investment properties 

If you’re ready to talk to someone about building your dream home, request a consultation. 

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