If you’re thinking of building a home, you may be wondering how financing works. Get answers to frequently asked questions and learn about available construction loan options here at PSECU.
When you’re building a home, your mortgage process will depend on whether you’re purchasing the lot and the home together or separately.
Once you find a lot to purchase, closing takes place. If you don’t already have plans for a builder, you may need to get a land loan specifically and then later convert this into a mortgage when you’ve secured a builder.
If you already have a builder lined up, you can cover both transactions at this initial settlement with a construction draw loan.
For a construction draw loan, the steps below outline the typical path:
Please note the processes outlined below reflect PSECU’s practices and may vary by lender.
While it may vary by lender, here at PSECU, our construction loans typically offer borrowers and their builders 12 months to draw on the loan. If all the funds aren’t drawn by the end of the 12 months, we advance the remaining amount, placing the funds into a holding account for the member. At that point, the member is required to start making payments on the fully drawn amount.
When financing a new build, the lender may need to approve the builder before construction begins. Here at PSECU, this is only the case if you’re getting a construction draw loan where we’ll be disbursing funds directly to a builder. This process helps ensure that the home will be built to the specifications provided, leaving the buyer and lender with a home that is worth the appraised amount.
If you’re buying a new build in the first scenario outlined above (where you don’t close on the house until the home is near or at completion), you don’t have to have the builder approved.
Applying for a construction loan is just like applying to purchase an existing home. Instead of another homeowner being the seller, the developer or builder is the seller. To make sure you have everything you need, we recommend speaking to one of our mortgage consultants who can guide you through the process.
As with all our mortgage options, our construction loans offer lower closing costs than many lenders. We service our loans in-house. And we have adjustable- and fixed-rate mortgages available, as well as various term options, to help you find a mortgage that fits your budget. Plus, we don’t charge higher rates simply because you’re building a home. You have access to the same competitive rates that buyers of existing homes enjoy.
Our mortgage consultants are experienced professionals who are ready to help you finance construction of your dream home. Contact them today to discuss your options and learn about all the other perks of being a PSECU member by calling 800.237.7328 ext 3878.