Residential Construction Loans

Sometimes you’ll find the perfect home that’s move in ready, while other times, the only way to get what you truly want is to build a new home from the ground up. That’s when you need to secure a residential construction loan. 

At First Bank & Trust, we offer flexible financing to cover your home construction needs. 

 

What is a residential construction loan?

A residential construction loan provides you with the funding needed to build your dream home. These loans are short term compared to a traditional home mortgage and the funds are paid out in stages as work is completed on your home. 

 

Residential construction loan vs. home mortgage

While you’re likely familiar with a traditional home mortgage, information about a residential construction loan isn’t generally common knowledge.  Here are some primary differences between the two loan types:

 


Mortgage Residential Construction Loan

Term

Usually ranges from 15-30 years

Term can vary based on your building timeline. With residential construction loans, funds are disbursed to you and the builder as progress is made on the home, not all at once like a traditional mortgage. 

Purpose

Purchase a home that is already built or is being built by a construction company, usually in a neighborhood

Funding to have your home custom built, typically on your own land, through a private construction company you hire

Rates

Can be fixed or variable depending on your lender

Fixed rates

Type of loan - secured or unsecured

Mortgages are secured because your home is used as collateral

Residential construction loans are unsecured loans since your unfinished home can’t be used as collateral

Repayment

You pay your mortgage each month after securing the loan

You pay interest only until construction is complete, then switch to monthly mortgage payments

 

 

How to qualify for a residential construction loan

When applying for a residential construction loan, be prepared to provide the following:

  • Construction timeline: What timeline do you have in mind for completing your home construction? 
  • Realistic budget: Your lender will want to know how much you expect everything to cost, so prepare a realistic budget outlining all costs associated with the project. 
  • Detailed plans: Along with your budget, have the overall plans for your construction project available so the lender is aware of what is being financed. You will likely be asked to provide plans or blueprints from your builder or architect. 
  • Traditional mortgage documents: You will also need to provide all the traditional documents you’d submit if you were securing a typical home mortgage including tax returns, bank statements and pay stubs. With a construction loan, your builder may also be asked to provide some financial information. 

 

Residential construction loan resources and tools

Securing a home loan requires support every step of the way. First Bank & Trust is here to help you through all stages, from the loan research phase, to the day you break ground, move into your new home, and beyond. Here are some of our most useful resources and tools to help you through this process. 

Customer Support

Credit Assessment Calculator

Manage Debt Calculator

Loan Comparison Calculator

 

Frequently asked questions about residential construction loans

Let First Bank & Trust Help You With Your Residential Construction Loan

For more than 40 years we’ve been helping members of our local communities build the home of their dreams. When you’re ready to start building your dream home, the friendly and knowledgeable loan officers at First Bank & Trust are ready to support you.

Get in touch with our team of local loan officers by calling 866-285-2239 for more information or to ask a question.

When you are ready to get started with your residential construction loan, simply complete our quick and easy online application.

Apply for your residential construction loan

 


 

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