MORTGAGE KNOW HOW

Building a home?

When you're building your own home, you want to make sure you're dealing with a financing process that serves you well. Our expert lenders have a proven process from the building phase to the permanent home loan closing--and a close working relationship with local builders.

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Get pre-qualified

Before you get started, come see us to get pre-qualified for a construction loan. We can help you determine how much you can spend building your new home. We will first look at the amount of your down payment. Next, we will determine a monthly payment you can afford. From this, we can determine the total amount you can spend building your home. Typically, we can loan you up to 80% of the lower of the total costs or appraised value of your new home.

When it comes to a construction loan, your down payment can come from various sources including:

  • Savings
  • Equity in property you plan to sell (like your current home)
  • Sweat equity (anything you plan to do yourself)
  • Current equity in the lot or home site

Buying a lot

Now that you are pre-qualified, you can start shopping for the perfect place to build. This can be a residential lot or land. Your realtor can help you identify lots that are for sale in the area you would like to build.

Site considerations

  • What are the neighborhood covenants? You will want to find out if the site is governed by any specific rules, often referred to as covenants. If so, you should review the covenants and be comfortable following these rules when you build your home.
  • Consider access to utilities. For rural properties, you should think about how you will get water and sewer services to your new home. There may be regulations governing new water wells and wastewater systems that you need to consider.
  • Think about ordering a survey. This is especially important for a rural property that is being split into multiple parcels as you will need to know the official boundaries of your site when you begin to build your home.
  • Are there any special assessments? These are additional charges that are due at the same time as your property taxes. These assessments help to offset the cost of developing the infrastructure in the community where your lot is located.

Financing terms

  • You will need about a 25% down payment for your home site purchase.
  • Repayment can be structured over 5 years.
  • The interest rate is fixed.

Design your floor plan

You can choose to design a floor plan on your own or enlist an architect or contractor for help. Either way, this step is crucial as these plans are relied on for all future decisions.

Get an estimate

With your finalized floor plan in hand, you can work with a contractor to obtain a bid for the project. It is important to identify all the costs involved in the project. Your loan officer can provide you with a spreadsheet that lists all possible costs to help ensure everything is properly considered in your construction budget.

Review the appraisal

As your lender, we will order an appraisal for your new home. The appraiser will review the plans, the cost estimate, and the site where you plan to build. From this analysis, a final fair market value of the property as complete is determined.

Construction loan closing

We will keep you informed on the progress of your construction loan and schedule a loan closing as soon as everything is in order. Please keep in mind that no work can begin on your home until the loan closes.

You will receive a Closing Disclosure at least 3 days before closing. The Closing Disclosure is the one-stop shop when it comes to your construction loan. You can see what you will be expected to pay in monthly interest and what we anticipate your housing expenses, like real estate taxes and property insurance, will cost you on a monthly basis.

Start building

You and your contractor can start building your home. This process typically takes between 6-9 months. However, if unforeseen circumstances (like the pesky Kansas weather) prevent the project from being finished on time, we can extend the maturity date of your construction loan.

Your contractor may bring unpaid bills for your construction costs to us. However, we will contact you first before paying any funds out of your construction loan. Contractors and the main sub-contractors will be asked to sign lien release waivers when they are paid.

During the construction phase, you will pay only the monthly interest due on the amount advanced on the construction loan.

Nearing completion

As your home nears completion, we will start talking to you about converting your construction loan into a permanent home loan. This means the funds you advanced to build the home will be seamlessly transferred into a traditional home loan. At this point, we will also help you lock your interest rate if you have chosen a fixed-rate home loan.