You’ve decided to build your dream home and now it’s time to pursue a construction loan.
Whether you own you lot or need to purchase a lot, Prime Lending can help. If you already own your lot, we can use lot equity and apply it to the down payment requirement on your construction loan. For example, if your lot value is $100,000 and you owe $40,000, you will have lot equity of $60,000 to apply to the down payment requirement. The down payment on a primary home is as little as 10% on the first home and 20% on a second one.
If you do not own a lot, Prime Lending can finance both the lot and construction cost into the construction loan.
If you are purchasing a lot, I suggest working with your builder and a knowledgeable Realtor to assure the lot will accommodate the home you are building. There could be additional costs in preparing the lot for your home and your builder can be helpful with explaining these.
In order to obtain a construction loan you first need to have your builder selected and have plans, specifications, cost to build, and construction contracts.
During the course of construction, we will disburse loan funds to the builder as progress is made on the home. Before each disbursement, our inspector will visit the site to make sure work has been completed before funds are sent to the builder.
The homeowner will make interest-only payments during construction as funds are disbursed to the builder. At completion of construction, the homeowner may select any loan product Prime Lending offers for their permanent mortgage.
As of this this writing, the interest rate on construction loans is a prime rate plus 1%. The prime rate is currently 3.500%, therefore construction rate is 4.500%. Be sure to check with me or Prime Lending for the most current interest rates and fees.
The homeowner then pays lender fees and an appraisal fee on the construction loan only, and not on the permanent mortgage.
The interest rate on the permanent mortgage can be locked during the construction phase to protect the homeowner from rate increases.
Advantages to the builder include a 10% advance at the close of the construction loan, a flexible draw schedule, disbursements wired directly to the builder’s checking account, and an easy registration process for approval with our construction department.
For more information, please contact me at 520-631-4871, and get building!
Jim Roberts
Senior Loan Originator, Prime Lending
Note: Prime Lending just came out with a Jumbo Construction Loan Program for loans up to $1,500,000. Call Jim for details!
