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Construction Loans

There are endless reasons to get a construction loan through Timberline Mortgage! The biggest is that your dream home just doesn’t exist yet! 

 Types of Construction Loans

Construction loans are different from mortgages since they typically only cover the cost of the construction itself. Usually, once the home is built, you would need to apply for a mortgage as a separate process. However, there are different types of construction loans to consider:

Construction-Only

This is typically only issued for a year and will only cover the time it takes to build the home. This is also a bit harder to get since there’s a lot of variables that make lenders a bit nervous. Those that do approve them tend to give a higher interest rate. 

 

Construction-To-Permanent

This is similar to the construction-only loan, but this is a bit easier to obtain, especially if you are going to be the initial owner of the home. While the home is being built, you would typically only make payments on the interest until construction is completed. At that point, you would pay like you would on a regular mortgage. 

 

Renovation

If you already own your home but it’s not quite to the dream yet, this loan can be added to your current mortgage to renovate your home so you don’t have to worry about making two separate payments. 

 

Owner-Builder

Usually when you look to build a home, you have a general contractor who oversees everything from framing, to plumbing, to painting, and so on. There are times, though, that someone might want to be their own general contractor. When this happens, typically lenders would need to know if they have the experience, education, and licenses they need to make the project work. 

 

End Loan

This would be the loan that you would apply for either once the home was finished. This is usually helpful with a construction-only loan. 

 

Qualifications

In order to get a construction loan, there are a few factors to consider. 

 

Get A Licensed Builder

The lenders we work with at Timberline Mortgage typically would want to know who will lead the project. 

 

Get All Documents Needed

This would be all the contracts, licenses, permits, references for the builder, and a detailed pricing list.

 

Get Pre-Approval

This is critical to getting any loan. This includes making sure you have a credit rating of “Good” or better (usually a FICO score of 720 or higher), a decent enough income stream to pay off the loan within the term limit, a low debt-to-income ratio, approvals for both the contractor and budget, and a down payment of at least 20% of the total cost. Once you have all of that, you’re good to go!