Does It Matter Which Lender I Use For A Construction Loan?
Yes, it absolutely matters! You should choose your lender carefully. Most construction loans are issued by banks, not mortgage companies, as the loans are typically held by the bank until the building is complete. Because construction loans are more complicated and varied than mortgages, you will want to work with a lender that has experience with these loans and is one of Suprema Homes’ Approved Lenders. We recommend you contact more than one of these lenders to see which of the loans they offer best suit your situation.
What items should I consider when selecting a lender for my construction loan?
- Work with a loan officer that is experienced in construction loans and one who is prepared to walk you through the process and protect your best interest. An experienced loan officer can be a big help in creating a realistic budget for your project. Following the bank’s budgeting format can help you with cost control and can also help you obtain a loan from that bank.
- Different lenders have different policies around construction loans that you need to understand before deciding upon a lender. For example, if you have a mortgage on your current home that you intend to sell, some lenders will not count that against your borrowing limits. Otherwise, you may need to sell your existing house before you can obtain a construction loan to build your new home.
- Lenders offer different interest rates. Obviously, you want the best terms and rates available. If you feel more comfortable with a particular bank but their rates are a bit higher than another bank, inform your preferred bank that you would like to work with them, but they need to match the rate of their competitor.
- Understand what happens at the end of the construction loan. Will you be able to roll your construction loan into a mortgage? If so, will there be additional closing costs to do so and what will the interest rate be? Also, if you decide to use a different lender for your mortgage at the end of the build, will you be able to do so without penalty?
Suprema Homes is here to help you make a success of your new home build. If you have any questions please contact us for more specific information and be sure to select a lender from our approved list.