Vice President, Commercial Lending
Thinking about building a new home for your family? If yes, this can be an exciting time. At INB, we’ve found many customers have the same questions as they go through the process of getting a construction loan and building.
If you’re feeling overwhelmed with starting the steps to build your home, we can help – from answering these most-asked questions to the expertise of our construction loan team who can assist you with each new development. We’ll walk you through each step of the building process until you’re ready to walk through your newly constructed front door!
1. What is the first step I should take in the home-building process?
As a construction loan officer, many people come to me and say they are thinking about building, so the first question I ask them is: “Have you talked to a builder?” If you aren’t sure that building is a financially feasible option, at INB we begin by checking your credit report to see what loan you can afford. Then we talk about building plans and types of homes. I encourage homeowners to get multiple bids from local construction companies, whether it’s someone you have picked out from word of mouth or a company you learn about at a home show
2. What steps should I expect from the bank?
After pulling together your financial information, we’ll talk about what you have in mind for your new home – the location, floor plan, and other details – and then I can estimate a square footage price based on that information. At INB, you need to qualify for the loan and be able to make a down payment, which includes both the construction cost and the cost of the lot.
Once you qualify for financing, you are ready to get a contract with a builder and create construction plans. Then INB will order an appraisal, and as long as the loan-to-value (mortgage loan balance compared to home value) is accurate, we’ll close on your construction loan, which will be set for 12 months. (It is important to note that if you have a construction loan and a loan on a home you’re currently living in, you will need to qualify for both loans.)
During the construction process, your builder will provide all of the bills for the month, such as electric and plumbing. We’ll put those bills on a spreadsheet so that we can review the cost breakdown, inspect the job site to make sure everything is accounted for, and then send that information to the title company for bill payout.
3. When should I begin making decisions about the interior and exterior of the home?
I always tell those who are building: pick out everything before the hole is even dug! You’ll need to choose your cabinets, flooring, light fixtures, where your electrical outlets will be, and so much more – and the sooner you do that, you won’t delay construction to make those decisions.
4. When do I need to move from construction loan to mortgage loan?
When your home is almost complete, we will need to talk about the mortgage loan and get updated financial information – paystubs, bank statements, and all other pertinent documents. Why? Because many situations can change over the four to six months that a home is built, including financing decisions. While one family might opt to include all of their towel rods in their mortgage loan, another family might pay the rods out of their pocket.
Once all of those updates have been accounted for, it’s time to transfer from home builder to homeowner!