.png)
Partner with your trusted Friendship loan officers, known for a proven track record with local contractors. PLUS, our dedicated construction loan specialist will guide you through every phase, ensuring your home-building journey is smooth and stress-free.
What is a construction loan?
A construction loan is a short-term financing option, typically lasting 9-12 months, designed to fund the building of your new home.
Here’s how it works:
.png)
Disbursements:
Loan funds are released in stages as your home construction progresses.
.png)
Interest-Only Payments:
During the construction phase, you’ll only need to make interest payments, keeping costs manageable.
.png)
Smooth Transition:
As your home reaches completion, we celebrate this milestone by guiding you through
the transition to one of our classic mortgage products, tailored to fit your needs.
the transition to one of our classic mortgage products, tailored to fit your needs.
What You Can Expect During The
Construction Financing Qualification Process
1. Initial Consultation: Begin with a discussion of your plans and goals for your new home. This helps establish a foundation for the qualification process.
2. Credit Assessment: Your credit score will be reviewed to ensure it meets the required threshold for financing.
3. Income Verification: You'll provide documentation to confirm stable income, including pay stubs, tax returns, or bank statements.
4. Debt-to-Income Evaluation: You loan officer will assess your debt-to-income ratio to gauge your financial health.
5. Down Payment Discussion: A review of your down payment options will occur, with a focus on the required 20% for construction financing.
6. Property Details Review: We'll will need information about the building lot, including its ownership and zoning status.
7. Project Timeline and Plans: You’ll present a detailed timeline for construction and comprehensive building plans to demonstrate project readiness.
8. Budget Presentation: A complete budget outlining all construction costs will be required for evaluation.
9. Contract Review: If you have a builder, the lender will review the signed contract to confirm project accountability.
10. Final Approval: Once all documentation is submitted and reviewed, you'll receive the final decision on your financing application.
Don't Have Everything? No Worries!
Starting the new home building process can feel overwhelming, especially if you don’t have all the necessary information at your fingertips. We understand that every homebuyer’s situation is unique. You can begin the conversation even if you don’t have all the pieces in place.
Our loan officers are here to guide you through each step. They will help you gather the required information and provide support tailored to your needs. We’re committed to making your home construction financing experience as smooth and manageable as possible.
Ready to take the first step?
Let’s turn your dream home into a reality!or call us to schedule an appointment at 812-667-5101
Decode the Jargon: Your Guide to Lending Lingo
Navigating mortgage terms can be confusing, but it doesn't have to be. Demystify the process and be empowered with our Lending Lingo Guide.
Tips for Navigating the New Home Construction Process
Building a new home can be a rewarding yet challenging experience. Here are some essential tips from your Friendship State Bank Loan Officers years of experience to help you through the process:
1. Communicate, Communicate, Communicate
Be transparent about your plans with your lender from the outset. Ask plenty of questions to ensure you fully understand the process of accessing your loan funds. Clear communication will make it easier to get the money you need when you need it.
Maintaining open lines of communication with your contractor is equally important. Discuss your construction timeline, design choices, and any other pertinent details regularly. Don’t assume that your contractor will always reach out to you; take the initiative to check in frequently.
Regularly review your contract and touch base with both your contractor and lender if you notice any changes. Adhering to the contract helps prevent unnecessary delays and complications.
2. Ensure Your Allowances Are Realistic
When your contractor provides a quoted price, it will include budget allowances for various aspects of the home—such as doors, windows, flooring, cabinets, and fixtures. Make sure these allowances align with the quality of products you desire. Imagine the disappointment of finding out you’re only budgeted for low-quality windows when you had your heart set on energy-efficient options.
It’s wise to set aside cash reserves in a savings account for unforeseen expenses. This reserve can also fund upgrades if you fall in love with a cabinet style or light fixture that exceeds your initial budget.
3. Prepare for the Unexpected
Expect the unexpected. Everything from weather delays to contractor availability can impact your construction timeline. When delays occur, keep the bigger picture in mind: the joy of moving into your dream home. While navigating the challenges of building can be tough, remember that the payoff will be worth it when you step over the threshold of your finished home for the first time.
Rely on Friendship Loan Officers for Guidance
Our Friendship State Bank loan officers have seen both the best and worst case scenarios throughout their careers and have accumulated a wealth of knowledge. Don’t hesitate to reach out for help or to schedule your free consultation today!
or call us to schedule an appointment at 812-667-5101
Construction Loan Frequently Asked Questions
Why do construction loans may have additional requirements for qualification and approval?
Banks take additional risk on construction loans. If a borrower is not able to make the payments, the bank is limited on how they can recover the lost funds.
What are the requirements for qualifying for new home construction financing?
- Good to excellent credit
- Stable Income
- Low debt-to-income ratio
- A 20 percent down payment
- Building lot details
- Construction timeline
- Detailed plans
- Realistic budget
- Contract with the contractors or general contractor working on the project
Are there additional requirements for specialty homes?
Some specialty homes like log cabins, pole barn homes, and manufactured homes have additional qualifications and may require different financing options.