Construction Loan FAQ’s

The Construction Loan Process

The process of building a custom home can be daunting the first time a dreamer sets out to realize a lifelong dream. Recent events in the financial sector have made qualifying for home construction financing much more challenging. Qualified borrowers must provide substantial proof of their ability to repay the loan. While the number of [...]

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Steps to Increase Your Credit Score

Credit will affect your ability to get a construction loan. For the credit-challenged, this means working hard to clear up bad debt. There are steps to increase your credit score. Begin with your credit report. It is a good idea to check your credit report every three months. If you cannot afford it, then go [...]

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Typical Disbursment/Draw Schedules of a Construction Loan

A draw schedule is an agreement between the homeowner, builder, and lender in regards to when funding is disbursed. A typical draw will release funds for projects as they are finished. There are usually four to six draws in a construction loan, but the total depends on how large the building site is. Each draw [...]

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Should I Lock in My Interest Rate or Let it Float?

Applying for a construction loan can be made difficult when deciding on whether or not to lock in or float your interest rate. There are factors to consider before making a decision. When you first become approved for a construction loan, your interest rate will most likely be based on what type of loan it [...]

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Draw vs. Vouchers

Now that you have the approval of your construction loan, how do you receive it to start building your new home? There are two ways the funds are released to the builder: the Voucher Reimbursement system and the Draw Reimbursement system. The Voucher Reimbursement System This old system has been in effect for quite some [...]

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Why Are Loan to Value (LTV) and Loan to Cost (LTC) so Important?

Qualifying for a construction loan requires a good credit score and the ability to pay it back. What many homebuyers do not understand is that there is more to know than just the basics. A good rule of thumb to follow is to ask if you do not know or understand. For instance, loan to [...]

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Should you Hire a Builder or be an Owner Builder?

Owning a home is quite an achievement. It is the American dream for many families, which only gets better when you design and build your own home. Building your own is a great responsibility but there are questions you will have before undertaking the job. What pros and cons should you know about before committing [...]

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What are the Typical Steps in Qualifying for a Construction Loan?

Time and time again we are asked what the typical steps in qualifying for a construction loan are.  As such, we have written this article to shed light on the loan qualification process and have included all of the pertinent steps from beginning to end: Income Verification You will need to verify your income by [...]

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What do I do First? Get the Land or Get the Construction Loan?

Many times you may want to build your new home and you may even have building plans of your dream house, however you have yet to purchase land and receive approvals from your local municipality to begin construction.  Typically, you would have to first purchase the land and then apply for a construction loan.  This [...]

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Insurance for Construction Loans

As with any large project, insurance is required when building a home. Every bank will require that the homeowner have Course of Construction insurance and General Liability insurance. These insurances protect the contractors, the contractor employees, and the construction site. Course of Construction Insurance A short-term insurance that protects the homeowner’s building site from fire, [...]

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