Searching for your new home can be exhausting, especially if you know exactly what you want but can’t find existing properties that check off everything on your list. That’s when building your home can come into play.
When you construct a home from scratch, you have more control over choosing land, building materials, layout and design. It’s ideal when you have specific goals for your homeownership.
Finding financing for this type of project can be tricky, especially when you factor in the construction costs, origination fees and more. However, with a construction loan from The Federal Savings Bank, you can bring your vision to life.
How a Construction Loan Works
Whether you’re building or rehabilitating a home, a construction loan can be used to pay different costs during the process, including the land, labor, materials and any necessary permits.
Once you’re approved for a construction loan, your contractor can start accessing this money for the different stages of the construction process. When the project is complete, you’ll pay back the loan in full.
Types of Construction Loans
There’s a variety of construction loan options available depending on your project and financial needs.
Construction-Only
Like the name implies, a construction-only loan covers the construction of your project and must be paid back once your project is complete. You’d then have to secure financing for your mortgage.
This option can give you the ability to shop around for lenders and loan terms. However, keep in mind that it may be costly because you’d be paying for two separate originations and closing costs.
Construction-to-Permanent
Also known as a single- or one-time close construction loan, a construction-to-permanent loan starts as a construction loan and converts into a regular mortgage once your project is complete. Many borrowers find this option convenient and less costly since there’s only one set of origination and closing costs.
Renovation
If you’ve already found a home that just needs a little tender loving care, you can get financing for the renovations wrapped into a mortgage with a renovation loan. This way you can make one monthly payment to cover both the renovation and your mortgage.
Other Loan Options to Fund Construction
If you’re already a homeowner and have an existing mortgage that you’ve been paying off for a while, you may have built up a significant amount of equity in your home.
One option to fund your construction or renovation project is to tap into this equity with a home equity loan, home equity line of credit (HELOC) or cash-out refinance loan.
Both a home equity loan and home equity line of credit let you borrow money against the equity you’ve built in your home. The difference is that you’d receive all the money at once with a home equity loan while you’d draw funds as needed with a HELOC, much like a credit card.
A cash-out refinance allows you to replace your current home loan with one that has a higher loan amount. You’d then receive the difference in cash at closing, which you can then use to fund your construction or renovation project.
Why Work with Us?
The Federal Savings Bank offers a wide range of construction loans to suit all kinds of needs.
In-House Operations
Because our loan team is fully in-house, it may help make your experience better with more effective communication than lenders who outsource their operations. We work closely with your loan from application to close and ensure you receive regular status updates.
Decades of Experience
Our mortgage bankers have decades of collective experience closing construction loans, so you can rest assured your transaction is in good hands.
Personalized Customer Service
We know different borrowers have different needs. That’s why we collaborate with each individual to understand their home financing goals and to find a solution that works for them.
Start Building Today
Creating your own home doesn’t have to be complicated. With a construction loan from The Federal Savings Bank, you can achieve your financial goals while building your dream home.
Want to learn more about construction loans? Get started today!
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.
