Here’s your guide to the construction loan process at Merchants Bank. Whether you’re building your home from scratch or renovating an existing home, our local Mortgage Lenders can walk you through our construction loan options.
We’re with you from start to finish.
Learn more about our construction loans and the process by clicking on a link below:
- Vacant lot loan
- Construction loan options
- Construction to permanent loans: Financing your house from concept to completion starts with a construction loan, which allows you to pay for costs associated with building your home. Upon completion, the construction loan is modified into a permanent loan to repay the money used during the construction phase.
- Construction loan terms
- Frequently asked questions
A vacant lot loan is ideal for someone who wants to secure a building site in advance of new home construction.
10% Down Program – Up to 40-acre lot size acceptable and larger parcels allowable with larger downpayments.
Our construction loans are flexible to fit your situation, whether you’re buying a lot and building, building on land you already own, or remodeling a home.
- New Home Construction - Construction to permanent financing
- Purchase an Existing Home - Renovation options
- Lot Loans for Your Home Construction - Available up to 90% loan-to-value financing
- Remodel Your Current Home - Use your equity for a new roof or other home improvement projects
- Application: Choose your local lender and apply now. After reviewing your application, you will be notified if you’ve been pre-approved for both a construction loan and permanent loan. For qualified applicants, a minimum down payment of 5% is required if the purchase price is under $510,400 (certain programs may allow for a minimum down payment as low as 3%). With a 5% down payment, you will have a single permanent loan with mortgage insurance at 95%.
- The Appraisal: Once plans and specifications are received from the builder, an appraisal is ordered. After the appraisal is received, your loan package is submitted for approval.
- Construction Loan Approval & Draws: Upon approval, you can close on the construction loan. If applicable, your lot will be paid off with the first draw, title transferred to your name, and closing costs paid.
The builder typically takes draws (payments) throughout the construction phase. During this phase, you will only be charged monthly interest payments on the amount of the loan advanced. At completion, the loan may be modified into a permanent loan. Escrows will also be set up for your property taxes and homeowners insurance.
- Lock Your Permanent Loan Rate: Once the home is near completion, you have the ability to lock the interest rate on the permanent loan. Merchants Bank offers 15-, 30-, 45-, 60-, and 75-day lock options.
- Converting to Permanent Loan: When the home is complete the appraiser performs a final inspection and that, along with updated income and asset documentation, is submitted to underwriting for approval on the construction loan modification to make the loan permanent. If approved, you close on your home and move in. Construction to permanent loan modification allows for reduced fees on permanent financing with local servicing.
Click on a questions or section below to learn about common construction terms and see answer to frequently asked questions.