Financing
Securing a new construction loan
Are you uncertain about how to finance your upcoming project? We can put you in touch with a select group of lenders who specialize in construction loans and can help you find the best financing options for your needs or you can use your own lender and shop around.
First Steps
The first step is to get prequalified. This involves submitting some basic financial information to either one of our preferred lending experts or your own, who will then give you an idea of how much you may be able to borrow. A lending expert can help you navigate the complex world of construction loans and make sure you understand all of your options. They will also work with you to ensure that your loan fits within your budget and financial goals. Once you have a prequalification letter in hand, you can start looking at home plans and selecting the features and finishes you want in your new home.
After you have selected your home and made any necessary modifications to the plans, we’ll provide an upfront price before you sign a contract and work with your lender. At this stage we will help you order the necessary permits. This can take some time, depending on the location of your property and the specific requirements of your local government. You can also choose take advantage of our turnkey service and let us handle it all.
Explore the 5 Phases of the Construction Process
Learn about building permits
Typical Costs of a Construction Loan
The cost of a typical construction loan can vary depending on a variety of factors, including the size and scope of the construction project, the location of the property, and the borrower’s creditworthiness. In general, a construction loan will have higher fees and interest rates than a traditional mortgage, due to the increased risk and complexity of the loan.
The borrower will typically have some out-of-pocket expenses during the construction process, particularly during the pre-construction phase when the borrower is responsible for obtaining necessary permits, creating detailed plans and designs, and getting bids from contractors. Additionally, the borrower will typically need to make a down payment on the loan, which can range from 10% to 20% of the total project cost.
During the construction process, the borrower may also be responsible for paying for any upgrades or changes to the original plans that are not covered by the loan. For example, if the borrower decides to upgrade the kitchen appliances or add a custom feature to the home, they will need to cover the cost of these changes out of pocket.
It’s important for borrowers to have a clear understanding of the costs associated with a construction loan before they begin the process. This can help them plan their budget and avoid any unexpected expenses or delays. At Inspire Homes, we work closely with our preferred lending experts to help our clients understand the costs and fees associated with a construction loan and ensure that they are prepared for any out-of-pocket expenses
The cost of a typical construction loan can vary depending on a variety of factors, including the size and scope of the construction project, the location of the property, and the borrower’s creditworthiness. In general, a construction loan will have higher fees and interest rates than a traditional mortgage, due to the increased risk and complexity of the loan.
The borrower will typically have some out-of-pocket expenses during the construction process, particularly during the pre-construction phase when the borrower is responsible for obtaining necessary permits, creating detailed plans and designs, and getting bids from contractors. Additionally, the borrower will typically need to make a down payment on the loan, which can range from 10% to 20% of the total project cost.
During the construction process, the borrower may also be responsible for paying for any upgrades or changes to the original plans that are not covered by the loan. For example, if the borrower decides to upgrade the kitchen appliances or add a custom feature to the home, they will need to cover the cost of these changes out of pocket.
It’s important for borrowers to have a clear understanding of the costs associated with a construction loan before they begin the process. This can help them plan their budget and avoid any unexpected expenses or delays. At Inspire Homes, we work closely with our preferred lending experts to help our clients understand the costs and fees associated with a construction loan and ensure that they are prepared for any out-of-pocket expenses
How Loan Disbursements Work
The loan is typically disbursed in a series of payments, or draws, as the construction process progresses. Here’s a breakdown of how a building loan works and the draws at each step:
- Pre-Construction: The pre-construction phase includes obtaining the necessary permits, creating detailed plans and designs, and getting bids from contractors. During this phase, the borrower typically pays for these costs out of pocket.
- Foundation: The first draw is typically disbursed after the foundation has been poured and inspected. This draw covers the cost of the foundation and any other necessary site work, such as excavation or grading.
- Framing: The second draw is usually disbursed after the framing is completed and inspected. This draw covers the cost of the framing and any other related costs, such as roofing, windows, and doors.
- Rough Mechanicals: The third draw is typically disbursed after the rough mechanical systems are installed and inspected. This includes electrical, plumbing, and HVAC systems.
- Insulation and Drywall: The fourth draw is usually disbursed after the insulation and drywall have been installed and inspected. This draw covers the cost of insulation, drywall, and any other necessary materials.
- Finish Work: The fifth draw is typically disbursed after the finish work has been completed and inspected. This includes things like flooring, cabinets, countertops, and paint.
- Final Inspection: The final draw is disbursed after the final inspection has been completed and the certificate of occupancy has been issued. This draw covers any remaining costs associated with the construction, including cleanup and landscaping.
