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New construction

If you have a specific idea of the type of home you want and need, a construction loan may be the right choice. This type of loan is designed for the special needs you may encounter during the process.

What is a construction loan?

With a construction loan, you’re essentially asking a mortgage lender to fund something that doesn’t exist yet. These are typically shorter-term loans that pay for building a home. When construction is complete, most borrowers take out a new loan -- typically a traditional mortgage -- to pay off the balance of the construction loan. 

How to qualify

Construction loans are more complex than a standard mortgage, requiring extensive planning. That's why it's particularly important to work with an experienced mortgage lender.

In general, you will qualify for a construction loan if you have good credit and meet these requirements:

  • A qualified builder
    A qualified builder is a licensed general contractor with an established reputation for building quality homes.
  • Detailed specifications
    This includes floor plans, as well as details about the materials that are going to be used in the home. Builders often put together a comprehensive list of all details (sometimes called the “blue book”); details generally include everything from ceiling heights to the type of home insulation to be used.
  • The home value estimated by an appraiser
    Although it can seem difficult to appraise something that doesn’t exist yet, the lender must have an appraiser consider the blue book and specs of the house, as well as the value of the land that the home is being built on. These calculations are then compared to other similar houses with similar locations, similar features and similar size. These other houses are called “comps,” and an appraised value is determined based on the comps.
  • A large down payment
    Typically, 20% is the minimum you need to put down for a construction loan – some lenders require as much as 25% down. This ensures your lender that you're invested in the project.

Simplifying the process

To make the process of building even easier, we are making it possible for you to sign documents electronically! If you haven't met with a banker yet, you can get started by filling out our online application.

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