Building Your Loan

By Noelle Jabal

Ready to build a new home? You’ve either made a list of customizations you want or selected your plan, picked a possible lot location and chosen your builder/contractor. What’s next? The most important part: getting a homebuilder’s/construction loan.

A couple of things to keep in mind

While it sounds easier to get a loan from your personal bank, some national banks don’t offer homebuilder’s/construction loans. A few Dallas banks that do offer this loan are Regions Bank, BB&T, and Wells Fargo.

Some banks offer a program called Construction to Permanent Loans. This will help smooth the transition so you can start payments on your house as soon as you finish. More details in later steps.

Wish there were someone to help you out with the entire process from start to finish? Good news. There are people who help take care of the nitty, gritty work. They’re called mortgage officers. Any bank will have one. Their job is to make sure you get the appropriate documentation and disclosures needed for building a new home.

Next, the bank will review your eligibility and the builder you have chosen, and will check your finances. Your new home will also have to meet requirements for the loan approval process. Every bank is different, so check what your options are.

Completing an application is the next step. It’s important to have a copy of the construction agreement you have with your builder (this includes the lot value, customizations and an estimated cost of your home), a blueprint of the floor plan, and, if possible, a deed to the land. Every bank has a different application, so qualifications will vary.

Once your application is approved, which usually takes about 48 hours, a licensed appraiser will review your information and determine an estimated market value of your home by comparing it to surrounding homes.

You will then pay out-of-pocket for closing costs and the first down payment on your home.

At this point in the process, it’s best to get Homeowner’s Insurance. This will protect you from any financial responsibility for any damage/liability that occurs during the construction of your home.

This is where all the real fun starts. You begin drawing on your loan. Loan disbursements will be based on what’s getting accomplished. As a task is completed, it’s inspected in order to move forward. Banks want to make sure the money that is being drawn from your loan is being used for its initial intent. Draws will also be based on a schedule you’ve set with your builder.

The final step of this process is the Construction to Permanent Loan program that is offered by certain banks (ex: Regions & BB&T). Instead of going through a hassle to find another loan to start your payments on your home, the Construction to Permanent Loan automatically converts your construction loan to a regular loan so that you can immediately begin payments on your home.