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What Is A Construction Mortgage

New constuction loans with DCB Bank

A construction mortgage allows you to draw down on the full amount of the mortgage at predetermined stages of the home construction. Let us explain.

Construction mortgages are given on a progress advance basis. The full amount that you need to borrow, in order to complete your construction, is given to you in stages otherwise known as draws as you complete various levels of completion.

If you already own the land you want to build on, a first advance is available as equity take-out. If you have not yet bought the land, a first advance is available to assist you with the purchase of a vacant lot.

Construction Loan Vs Traditional Mortgage

Unlike a traditional mortgage, construction loans are not long-term loans that allow you to pay off your homes cost over time. They are short-term loans with higher down payment requirements that are designed to fund the build and get paid off. In fact, many people will use a traditional 30-year mortgage model to pay off a construction loan.

With a construction loan, payments are paid out after each phase of construction is completed, instead of a lump-sum payment associated with traditional mortgages. Additionally, lenders of construction loans will also require more information than a traditional loan, such as detailed construction plans and budgets. Compare mortgage rates and mortgage lenders if youre also in the market for a mortgage.

Features And Benefits Of An All

  • For construction or renovation projects
  • One closing, with one set of closing costs and no exposure to rising interest rates
  • Up to 95% loan-to-valuesubject to private mortgage insurance approval for loans exceeding 80% loan-to-value
  • Land or lot purchase can be included in the cost of the project
  • Up to 12-month term during construction phase, fixed-rate financing upon completion
  • Interest rate may be adjusted to the current market interest rate upon completion of construction
  • Fixed and adjustable rates available

Building or remodeling a home is an exciting project, yet it can be daunting. Here are some great ideas for getting started on building your dream home or remodeling your current home to make it perfect.

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Apply For A Construction Loan

To apply for a construction loan, there are a few types of documentation youll need. These include architectural plans and drawings, your builders certifications, building code compliance, and a schedule for periodic inspections. Youll also need to provide a detailed construction budget and timeline. Before you apply, its also a good idea to make sure that your finances are in order. You should make sure that your credit score is as high as possible, that you have a low debt to income ratio, and that you have enough in savings to cover the cost of a down payment and closing fees.

The Clear Mountain Bank Mortgage Advantage

Best Known Secret  KCSB Offers Self

With Clear Mountain Bank, our team is dedicated to being your complete resource for your mortgage lending needs. Voted Best Bank in Morgantown by Morgantown Magazine, we are a locally-owned, community-driven bank that offers the best rates, quick decisions, and exceptional service.

With numerous branch locations throughout North Central West Virginia and Oakland, Maryland, we are conveniently situated to offer mortgage loans and refinancing for Monongalia County, Preston County, Marion County, Harrison County, Taylor County, Doddridge County, Wetzel County, and more. Contact us today to learn more about the advantages of banking with a local, community bank that cares about you.

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Best For Veterans: Va Nationwide Home Loans

VA Nationwide Home Loans

VA Nationwide Home Loans is a great option for veterans looking for affordable construction loans, with availability in 47 states and up to 100% financing.

  • 640 minimum credit score recommended

  • Not available in Alaska, Hawaii, or New York

  • Not available for second homes or multi-family homes

True to its name, VA Nationwide Home Loans lends in all 50 states. However, their VA construction loan is only available in 47 states. You are able to check your homes eligibility for their program using their simple and short online form.

Their featured loan is a single-close loan that lets you combine the purchase of the land, the construction of the house, and the 15- or 30-year mortgage all in a single rate-locked loan. No payments are due during the construction period. VA Nationwide Home Loans could qualify you for a 0% down payment, but you would still need to pay cash for the VA funding fee.

VA Nationwide can create much larger loans, but the VA only guarantees up to $548,250 . Nationwides interest rates range from 1% to 1.25% higher than traditional mortgages for a pre-built or existing home.

The single-close convenience in nearly every state with up to 100% financing available makes VA Nationwide Home Loans the best VA construction lender.

Wells Fargo Best For Reducing Interest Rate Payments

Wells Fargo allows customers to apply for construction loans online and has an extensive network of loan officers over the phone. The bank also lets customers participate in its Builder Best Extended Rate Lock program, locking in an interest rate for up to 24 months, so customers dont have to rush into choosing a builder or finalizing designs before funding construction. Bear in mind this program does come with a non-refundable extended lock fee.

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Should You Get A Self

Whether you should get a self-build mortgage or buy from a builder really depends on how much control you want over the home building process.

Self-Build Mortgage

Self-build mortgages give you a lot of freedom over how your house looks because construction either hasnt yet started or is in the early stages. The big downside is that you will have to make payments on the self-build mortgage and on the mortgage you already have. You will also have to wait longer to move into your house because you will have to work with the builders to make sure that the house is built to your specifications. If you want a lot of freedom on how your house looks, a self-build mortgage might be for you.

Buying From A Builder

When you buy a home from a builder, you are usually buying a house that is either close to completion or already complete. A house with an advanced state of completion means that you dont have a lot of decisions left to make on how the house looks since those decisions have already been made. If you want to move into a house quickly, buying from a builder might be the best bet.

Additional Reading

Cost Per Square Foot Of Building A Single

Bank of Utah Construction Loans

Depending on the type of home you want to develop, there will be a big difference in construction costs. Builders offer two types of home construction plans stock andcustom-built homes. Stock homes are pre-designed to build efficiently. However, you have less control over the design.

A custom home can be completely designed to meet the owners wants. However, they are a lot more expensive. Stock homes range towards the bottom of the cost per square foot to build. Whereas custom homes can exceed $700 per square foot in construction costs for most cities. The final price of a custom home will depend on many factors, and one of the most important ones is the size of the property. The larger the size, the more materials are needed for the project. For example, a larger house may require you tocalculate the amount of concrete neededfor the foundation, which may increase largely with the size of the house.

$253,500 – $1,677,000

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Best For Excellent Credit: Us Bank

U.S. Bank was first created during the early 1860s and has since expanded to include a wide range of services to address personal needs, wealth management, business needs and corporate and commercial interests. The company is owned by its parent company U.S. Bancorp, which is a publicly traded company. Over the years, U.S. Bank has incorporated technology and accommodated changing customer needs while growing its influence as a financial company.

Individuals with excellent credit scores will find that U.S. Bank provides a large selection of loan offers and mortgages. These loans are available for the short-term. A short-term construction loan typically ranges around one year. The company uses specific personal loans for construction as well as for home improvement. Research the differences between the two before entering into a loan.

One benefit that makes U.S. Bank unique in its construction loan offerings is that the company encourages potential borrowers to research competent builders and loan officers within their area. Doing so helps facilitate a personal level of communication between loan officers and potential borrowers by connecting interested individuals with loan officers familiar with the location.

How To Choose The Right Lender For Your Construction Loan

Choosing a loan for your construction project is one of the most important decisions you will make. It is a long-term agreement with sizeable financial implications, and it is essential that you find a reliable partner that will ensure a tidy, transparent and stress-free process. Financial terms are the main point of focus, but you must also consider the lenders reputation and their ability to assist you through the various stages of the construction project.

The right loan is the one that best addresses your projects specific needs. Therefore, before you consider different construction loans, first you must assess your project and your financial means to determine the scope of the loan you will need. After that, its all about finding the best deal with a trustworthy lender.

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Online & Mobile Banking Unavailable Weekend Of August 7th

During the weekend of August 7-10, SmartLink online banking and the Clear Mountain Mobile app will be largely unavailable as we perform system enhancements. We expect downtime for these systems to begin around 4:30 pm on Friday, August 7th. These systems will remain down, with some intermittent access, through the weekend and should become operational again by noon on Monday, August 10th.

If the systems are accessed during a period of intermittent availability, please be aware that users will have inquiry only account access. Services such as Transfers, Bill Pay, and Zelle® will not be available for the duration of the weekend.

We apologize in advance for any inconvenience and look forward to the opportunity of providing additional services to our valued customers in the near future as a result of these upgrades.

Give us your feedback!

We want to hear about your experiences at Clear Mountain Bank. If you have a comment, suggestion, or just want to let us know about a great experience you had at your local branch, please send us your feedback using the form below. Dont include any confidential personal information or account numbers in your comments. Please note that this form is for general comments only. If you have a question or problem that needs immediate attention, please visit the Contact page.

How We Chose The Best Construction Loan Lenders

Bank Loans: Top Banks Offering Personal Loans in 2020

We reviewed more than a dozen construction loan lenders before choosing the top seven. Our top choices were based on the types of loan programs they offer, their down payment and minimum loan requirements, as well as their interest rates. We further evaluated the best construction loan lenders based on their company reviews and third-party ratings.

Our top contenders had competitive interest rates, were available to an array of borrowers, offered multiple types of loan programs, and had mostly positive reviews.

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How Are Construction Loans Different From Improvement Loans

Construction loans are loans you obtain to build a new home or real estate project, whereas improvement loans are those you secure to renovate, improve, or refurbish a property you already own.

Since lenders generally consider construction loans riskier than improvement loans because there isnt a structure yet, the borrower could decide to walk away, and construction could be delayed or go over budget. As a result, the construction loan qualifications are stricter than those for an improvement loan.

You can also use a personal loan, home equity loan, or home improvement line of credit for improvements and new construction. However, since these loans are secured loans and are typically more expensive, theyre not generally recommended for new construction.

What Are Some Construction Loan Alternatives

Alternatives to construction loans can help you build your dream home. For example, FHA construction loans help you obtain your much-needed funds. The FHA stands for the Federal Housing Administration, and its designed to help provide both mortgage insurance and loans. The FHA construction loan is considered a loan that becomes a mortgage once the construction period is finished. However, the limited number of FHA loan lenders can make it hard to find a loan partner.

Hard money loans can also be an alternative to construction loans. Hard money loans are typically short-term and secured with real estate as collateral. These loans are usually viewed as less risky than other funding alternatives for the lender because the loan is secured with real estate. However, the loan is riskier for a borrower because defaulting on the loan could cause the borrower to lose the real estate provided as collateral.

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Things To Consider Before Getting A Construction Loan

Before applying for a construction loan, think about your available options and research building costs. When creating a budget for building, consult multiple professionals to have a better perspective. Expenses can exceed your expectations, so give yourself some room for error when thinking about the total amount needed for your construction loan.

Consult with professionals such as builders and financial experts to have a fuller understanding of what building a home entails. Its important to understand the process to effectively anticipate costs and project needs. Think about your personal level of risk tolerance before taking a loan.

One important step when considering a construction loan is to organize your finances. Organizing your accounts and documents should allow you to understand your financial position before deciding on a specific loan. Your financial position will indicate the type of terms and rates that are within your reach.

How To Get A Construction Loan

Construction Loan with C& F Bank

Before you can get the financing necessary to start your construction project, youll need to get approved for a loan. This process is typically more rigorous than for mortgages and other loans because the loan wont be securedor collateralizedby a home. In addition to imposing traditional borrower standards, lenders also will need to review and approve architectural plans, an estimated construction timeline and a proposed budget.

To be approved for a construction loan, you will need:

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How To Choose The Best Construction Loan Lender

Construction loans can be complex, which is why its best to work with a lender who has experience with this type of mortgage. Procedures and policies differ from lender to lender, so look for one that can feasibly work with your timeline and needs.

To find the best mortgage lender and get the lowest-cost loan, compare several construction loan lenders and their rates and terms, and also compare your interactions with them. If youre looking for responsiveness, for example, take note of this in your communications with the loan officer. Ultimately, the best lender for you depends on your unique goals, preferences and financial situation.

When Does Construction Loan Repayment Begin

Typically, lenders will require that you make monthly interest-only payments during the construction phase, and then the principal will be repaid once construction is finished. However, government-backed loans generally dont require any payments until the construction is complete. After that, youll make monthly payments for the duration of the loan as you would a standard mortgage or other loans.

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Best Construction Mortgage Lenders

Not every mortgage provider offers construction loans. We’ve chosen home construction lenders that rank among the best in several categories.

Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list ofour partnersandhere’s how we make money.

Building a house or buying a house that’s under construction rather than purchasing an existing home provides an opportunity for some personalization. But it comes with a challenge. You’ll need to think about financing the building phase as well as the completed home.

Finding an experienced and accommodating home construction lender is essential. NerdWallet has chosen these construction mortgage lenders as standouts.

» MORE: How much does it cost to build a house?

Building a house or buying a house that’s under construction rather than purchasing an existing home provides an opportunity for some personalization. But it comes with a challenge. You’ll need to think about financing the building phase as well as the completed home.

Finding an experienced and accommodating home construction lender is essential. NerdWallet has chosen these construction mortgage lenders as standouts.


Wells Fargo accepts down payments as low as 3% on fixed-rate mortgages through its yourFirst Mortgage program.

Construction Loan Lenders Requirements And Criteria

Construction Loans

When applying for a construction loan, keep in mind the additional financial information and documents that you will likely need to provide. In general, credit scores above 620 are expected to receive stronger loan terms. Higher credit scores allow borrowers the opportunity to achieve better loan terms and flexible rates.

In general, construction loans are directly given to the builder in set increments. The borrower will most likely not have direct access to the funds which differs from other types of loans.

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