If you are considering building a home for either an investment or to create the house you’ve always envisioned, our construction experts will handle the financing process for you so you can focus on other important details.
Construction loans can come in the form of ground up building, or in the form of improving an already existing structure (Purchase Plus Improvement).
If you are building from the ground up, lenders will generally advance you 65% of the value of the bare land – meaning you have to come to the table with a 35% down payment of the purchase price of the land. We then need to determine the budget of the build so we can submit that to the lender for review. Once your financing of the build is approved, you will be entitled to a series of draws of funds that will be given to you at certain stages of the process.
1. 40% of your construction budget will be released to you once you can prove that your house is at a stage called “lock-up.” That means that your roof is on, all windows and exterior doors are in place, and the house is weather protected and air-tight.
2. Another 25% of your construction budget is release to you once you can prove your electrical wiring and plumbing has been started, your drywall has been completed, and your exterior walls have been finished with vinyl siding, hardy plank, or any other form of exterior walls you have chosen.
3. 20% more will be release to you once your kitchen and bathrooms are done and all of your interior doors have been hung.
4. The remaining 15% of your construction budget will be handed over to you once the home is at least 95% completed – painted, all flooring done, finishings in place (base board, door knobs, lighting fixtures etc.)
Once all draws have been received and your home is complete, it is time to refinance the construction loan into a mortgage. This mortgage can either be secured before you start building by the lender that is facilitating your construction loan, or moved to another lender if we can find you a better rate or mortgage product.
That is a general overview but, of course, there are many facets to the process. You will be in good hands if you let us handle everything for you. Call us for more information or to get your application started right away!