Home Construction Loans Explained

Plan on building your dream home? Just as buds appear on branches, new homes start being built every spring. Most families will need to borrow funds to build their home. That is why many rely on construction loans.

Getting a home construction loan is different than other types of loans. It involves planning between the lender, the construction company, and you. You will spend a lot of time with these individuals, so make sure to create a reputable, easy-to-work with team.

There are two basic kinds of construction loans.

1. Construction-to-permanent loans: With these loans, the bank pays the construction company while the house is built. When everything is complete, the loan is converted to a home mortgage.

    

2. Construction-only loans: Construction-only loans must be paid off in full once the building is complete. This is if you have another institution in mind for your mortgage.

You might be thinking, “How can I get a construction home loan?”

First, you can make an appointment with a construction loan officer. Note that not all banks offer construction home loans. When you are getting ready for your appointment, gather some information. You won’t need to provide proof of anything before formally applying, but write it down so you know where you are. Take note of: 

• The loans you already have.
• How much you earn per year.
• What construction company you will hire.
• Which neighborhood you want.
• Your credit profile.
• How much you can put down on a loan.

Lenders want you to have a good debt-to-income ratio. This adds all of your monthly debts and divides your gross monthly income. Also, you will need a large down payment of 20%.

After learning more, you might have a better idea if you are ready to undertake on a construction loan. If you aren’t ready, there are steps to take to get yourself into a better position for the construction loan.  Some of these include:

• Pay your bills on time.
• Pay off your credit cards.
• Don’t open new lines of credit

If you are still unsure, or ready to apply today, contact Porter Bank. Porter Bank has expertise in construction lending and one of their experienced loan officers will guide you through the process.

Sheri Zimmer is a construction loan officer at Porter State Bank who is passionate about helping members of her community build their homes. Sheri enjoys guiding her customers throughout the lengthy, exciting process. She also takes pride in the homes that she helped to create.

For Sheri, education is important. She provides education to her customers because wants everyone to be set up for success! Sheri helps her clients think of all the costs that come with building a home, such as where would they live when they sell their current home.

Sheri is proud of her role as a “dream maker”. She is a member of the Homebuilders Association of Northwest Indiana. Sheri loves that she can help the economy with her work. Also, she enjoys building a relationship with her clients. One of her favorite things is being invited to housewarming parties, touring the home with her client, or looking at after pictures.

At Porter State Bank, we offer the Region friendly banking, built on trust. Call us for more information about Home Construction Loans. Main Office: 219-926-2136 . Click Here to see our current rates!