New Construction Lending
Yes, banks are still lending money for new construction. The interest rates are now at historic lows which makes building a new home even more affordable. We created this page to help answer some of our most frequent questions.
How much down payment do I have to put down?
The down payment size is going to depend on several factors including the location of the home, price of the home, your credit history, and appraisal. For a conventional 30 year loan up to $417,000 the down payment can range from 5% to 20%. The majority of our clients put between 5% and 10%. We have also been accepted into the FHA program which can have down payments as low as 3.5%. To get a better idea it is best to contact a loan officer and they should quickly be able to tell you what to expect.
How does a construction loan work?
A construction loan typically is an interest only loan during the construction period that will convert into a fixed mortgage at the completion of construction. The bank will disburse progress payments to the builder during construction and you will make interest only payments on the amount of money that is disbursed.
Can I buy my lot with a construction loan?
Yes. Your construction loan can fund the purchase of your lot and the construction of the home. This is generally less expensive than obtaining a lot loan and then a construction loan, because you will be paying closing costs twice.
Can my lot equity be used as part of my down payment?
Sometimes Yes. Generally you must own your lot for more than a year to use its equity as part of your down payment.
How do appraisals work?
In order for the bank to fund your loan they will do an appraisal from the blueprints and specification sheets we provide them. The appraiser's main consideration will be the location of where you are building and sales within the last 6 months in that area. The biggest key to consider is that you are building a home of less or equal value to the homes within a one mile radius.
If you have additional questions, contact one of our preferred lenders listed to the right to give you a more complete picture on new construction lending.
Sr. Mortgage Loan Specialist
Home Savings and Loan
35000 Kaiser Court, Suite 100
Willoughby, OH 44094
Area Sales Manager
First National Bank
36311 Detriot Rd.
Avon, OH 44011
CommStar Credit Union
832 Cleveland Street
Elyria, OH 44035