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Your Complete Guide to Construction Financing

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Building the home of your dreams is exciting. The thought of creating a new space designed to your exact specifications – from the size of the rooms to the color of the walls – is thrilling. Yet, just as a solid foundation is important to any well-constructed house, financing is a critical component of the construction process.

In this guide you will learn about: 

  • building a new home vs. buying a new home
  • documents and information you need for construction financing
  • tips for building your home
  • how to select a builder
  • types of construction financing

 

DOWNLOAD WHITEPAPER the complete guide to construction financing whitepaper.

How to Apply

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Documents and Information

  • Your Social Security number to obtain your credit report
  • Pay stubs, W‐2s and possibly full tax returns for income documentation
  • Bank and asset statements for verification of liquid and retirement savings
  • Any other necessary information based on your individual situation like business tax returns, current real estate holdings, etc.
  • A lot loan closing statement, if you already own your lot
Additional documents and information (when available)
  • Accepted offer to purchase – if purchasing the lot at the time of closing on your construction loan
  • Construction plans
  • Builder cost breakdown and specs
  • Complete signed builder contract
  • Insurance coverage, including builder's risk insurance – prior to closing

How One-Time Close Construction Loans Work

Get pre-approved

Find a knowledgeable construction lender and get pre-approved for your new construction loan. 

Select your lot

Find a lot to accommodate the home you want to build. The dimensions, pitch and location can all factor into the size and type of home you want to build.  

Select your builder

Educate yourself on the builders in your area by attending home builder shows, talking to vendors or requesting a builder's report. 

Submit your contract

Provide your blueprints and the construction contract. The contract should be as detailed as possible and include a spreadsheet itemizing all the costs associated with the construction of your new home. 

Close & lock your rate

Plan to close on your construction loan with your loan officer. If you are choosing to request conversion to a fixed-rate mortgage loan, you will be able to lock your rate up to six months before your construction is complete.  

Get ready to move

Once the construction phase is complete, the loan may be converted into a fixed-rate mortgage with regular monthly principal and interest payments.  

Types of Construction Loans

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This is a combined construction and permanent loan financing option to save you time and money. You’ll enjoy the convenience of one loan, one application and one closing date.

Benefits of a one-time close construction loan include:

  • Interest only payment during construction based on the funds drawn
  • Low down payment options
  • Maximum loan amount up to conforming loan guidelines of $726,200
  • Option to lock your rate up to 180 days prior to the final draw being made
architecht reviewing plans with builder in a partially constructed house.

Our portfolio construction loans provide financing options for homeowners that have high value construction projects that exceed conforming loan amounts. 

Benefits of portfolio jumbo construction loans include:

  • Interest-only payments during construction based on the funds drawn
  • Loan to values (LTVs) vary, with loan amounts available up to $3,000,000 
  • Long-term fixed rates, generally up to 30 years
  • Adjustable-rate mortgages (ARMs) with various term options
  • Once the final draw is made, you may have the option to relock your rate, for a fee, should the current rate be lower
empty upscale lot for new home construction.

A lot loan allows you to purchase land before you start construction. Once you’re ready to build, your lot loan can be financed as part of the construction loan. 

Lot loan financing benefits include:

  • Private Mortgage Insurance (PMI) is not required
  • Finance up to 20 acres 
  • 1-2-3 year balloon payment options with longer amortizations
mortgage lender handing a couple their house key.

In turn-key financing, the builder is responsible for the cost of construction. The homeowner finances the purchase of the new home when construction is complete and they are handed the key. 

Benefits of turn-key mortgage financing include:

  • Homeowner finances the completed project with a traditional mortgage loan 
  • Faster project, typically 4 – 6 months 
  • Less stress and money obligations while your home is being built 
  • Homes typically are built in subdivisions 
  • Flexibility to lock your rate up to 180 days prior to closing for free, should the current rate be lower
  • Builder is responsible for the construction financing

Construction Loan FAQs

Before your build your new home, review our Construction Financing FAQs so you can be empowered to make the right decisions for you, your lifestyle, family and personal goals.

We can also help you with...

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Homeowners Insurance

Your home is likely one of your largest investments. You deserve to have peace of mind that your home and the possessions inside are protected from life’s unexpected events.

Learn More about home and condo insurance

Have Questions?

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Loans are subject to credit and property approval, bank underwriting guidelines, and may not be available in all states. Other loan programs and pricing may be available. Certain conditions, terms, and restrictions may apply based on the loan program selected. The term of the loan may vary based upon program chosen. Property insurance is required; if the collateral is determined to be in an area having special flood hazards, flood insurance will be required.

Lisa Mahler
Lisa Mahler, VP Senior Mortgage Loan Officer, Milwaukee, WI

Your Trusted Construction Loan Officer

Building your dream home is exciting. We can review your goals and develop a personalized plan to help finance your new home.

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