Our experienced mortgage lending team understands that building your home can be confusing and complicated. Let us help you alleviate some of the stress. We’ll work with you, side by side, from the first day of construction through the financing of your finished home.
Construction loans are very similar in thought process to a purchase transaction. It boils down to income, assets for down payment and long-term affordability. CSB will do construction loans with as little as 10% down, but we do advise the customer to have an adequate amount of reserve funds available. A home construction often runs into miscellaneous expenses throughout or at the end of the process, such as landscaping, driveway, furniture and window treatments.
A typical home construction project is comprised of both land value and cost of construction. The general breakdown within those categories is 20-30% towards the cost of the land and 70-80% towards the cost of construction. For example, a $50,000 lot and a $200,000 cost of construction equals a total project cost of $250,000. Often, we do construction loans on land that the borrowers already own. If that land is paid for, it may even qualify as a down payment, where no additional out-of-pocket money is required. This will be determined by the appraised value, “subject to completion.”
A home construction project begins as a hole in the ground and then becomes finished floors and finally finishes with interior fixtures (lighting, plumbing, etc.). In addition to customers picking a suitable banker, CSB highly recommends picking a builder with whom you feel comfortable. The builder, along with the CSB mortgage lending team, will be your main support throughout the process and decision making.
Borrowers should pre-qualify for a loan amount that’s affordable and comfortable for them. Equally, if not more important, you must choose what you ultimately want your home to look like. Is it a two-story or a ranch? Do you want a walkout basement? How many bedrooms? What type of design do you want? Next, determined if the desired house can be accomplished within your budget. The land you choose to build on should be chosen based on the style and size of the desired house. If the land is already owned, a good builder will be able to help design or select a style of house that will fit the property best.
A borrower’s financial readiness involves pre-qualifying for long-term payment affordability. Confirming the borrowers have sufficient assets, such as checking, savings, investment and funds to support them after construction, are just a few of the areas we review. Newer homes generally result in new or additional furniture. They also typically call for landscaping and a new driveway. These are just a few of the different areas to take into consideration when determining if you are financially ready to build a home. As your mortgage lending partner, CSB is happy to discuss each of these areas with you throughout the pre-qualification process.
