Construction Loans Basics
A construction loan provides financing to build an entirely new residential, commercial, or agricultural structure or renovate, expand, or improve an existing residential, commercial, or agricultural structure. Some examples include a home, a warehouse, or a shop. A construction loan focuses on the property’s market value upon completion of the project.
How does a Construction Loan work?
A construction loan works much like a line of credit. Once the total project cost and loan amount is determined, the construction loan is established. Funds are then advanced/released by the bank to the borrower to pay for labor and materials in conjunction with the project’s progress through regular draw requests and progress inspections by the bank. The borrower only pays interest on what they draw for the time it is being used. Once the construction is completed, the construction loan is typically refinanced and replaced with traditional, amortized long-term financing (i.e. a conventional mortgage loan).
What is needed to apply for a Construction Loan?
- Itemized project cost breakdown and copy of the finalized plans/drawings and specifications itemized project costs, and finalized project specifications
- Two years of income verification (i.e. tax returns, W2s)
- Current verification of employment (i.e. paystubs)
- Completed and Signed Uniform Residential Loan Application
- A copy of the executed contract with the builder/general contractor (if applicable)
Then What?
Upon receipt of the application items, Charter Bank lenders review the project and render a credit decision, typically within 7-10 days of application. If approved, an appraiser is asked to visit the prospective site and review the plans, costs, and specifications to provide a projected property value upon completion of the project. This determines how much Charter Bank may loan for the project.
Call or email one of our lenders today to make your construction dreams a reality!
Matt Morris - NMLS #541740 / (515) 331-2265 / [email protected]
Greg Grote - NMLS #541741 / (515) 987-1000 / [email protected]
Brien Scandridge – NMLS #2146946 / (515) 331-2265 / [email protected]
Ciara Bemiss – NMLS #2163496 / (515) 987-1000 / [email protected]
Brian Vahle – NMLS #1168523 / (515) 446-2265 / [email protected]
Matt Pick – NMLS #720432 / (515) 986-2000 / [email protected]
Logan Crannell – NMLS #2146946 / (515) 331-2265 / [email protected]