HOW TO GET A LOAN TO BUILD A HOUSE
Financing the construction of a custom home is different from buying an existing property. Our construction loan options are designed to help you turn your dream home into reality, from the ground up.
What To Consider Before Getting A Construction Loan
Use a qualified builder
If you’re not a licensed general contractor with a proven track record, securing a construction loan can be more challenging. Acting as your own general contractor may require additional documentation to show you’re qualified to manage the project.
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 lets homebuyers finance both the land purchase and the costs to build their home. Once construction is finished, the loan can be converted into a traditional mortgage.
Unlike a standard mortgage, funds aren’t disbursed all at once. Instead, the lender pays the builder or contractor in a series of draws according to the project’s timeline.
How much construction loan can I afford?
The amount you can borrow with a construction loan depends on the land cost, construction expenses, and your down payment. Like traditional mortgages, interest rates also affect how much you can afford to finance.
How To Get A Construction Loan With No Money Down
Like traditional mortgages, some qualified borrowers can obtain a construction loan with no down payment. Certain USDA programs even offer zero-down construction loans, making it easier for homebuyers to finance building their home without an upfront payment.
What is an interim loan?
Some lenders provide short-term interim loans to help finance home construction projects, bridging the gap between building and permanent financing. To simplify the process, PrimeLending offers construction loans that combine your construction financing and mortgage into a single loan, saving you both time and money.
What is the difference between a construction loan and a regular loan?
Unlike a standard mortgage, a construction loan covers not only the cost of your home but also provides a short-term loan for construction, manages draw payments, and may include higher interest rates. We offer a streamlined two-step construction loan process:
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Temporary Construction Loan: Begin your project with a short-term loan. You pay interest only on the funds actually used for construction, not the full loan amount.
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Refinance to a Traditional Mortgage: Once construction is complete, we refinance your initial loan into a standard mortgage with the most favorable terms possible.
Additional Benefits:
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Lock your interest rate for up to 12 months for your second loan, with the lock fee refunded at closing.
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Receive closing cost credits when refinancing your construction loan into a permanent mortgage.
This process helps make building your home simpler, more predictable, and cost-effective.
Finance Your New Construction Dream Home
From choosing light switch locations to selecting colors and appliances, building a home involves many decisions. That’s why we handle the financing, so it’s one less thing to worry about. We focus on fast, efficient closings* with minimal paperwork hassles and keep you informed and supported throughout every step of the loan process.