Home Construction Loans
State Savings Bank offers several loan options for customers who want to build a new home that are available both online and in person. From lot loans to construction loans, to permanent long-term financing, we can finance both the construction phase and your mortgage. Our loan experts guide you throughout the entire process and can save you time, money, and stress. Our experienced financial advisors can help guide you through the steps of financing everything from start to finish. We offer a variety of different types of construction loans to meet your specific needs!
If you’ve decided to purchase a lot but you’re not ready to begin home construction, a lot loan could be your best option. This type of loan gives you more flexibility than some other types of home loans. Your loan repayment depends on your construction time schedule.
• If construction is set to begin within 12 months of the lot purchase, your payments will be interest-only.
• If construction is set to begin more than 12 months after the close of the lot purchase, your payments will be amortized allowing you to gain equity as you prepare for construction.
If you’ve decided to purchase a lot and you are ready to begin construction immediately, a construction loan is typically our recommended option. You pay a loan origination fee, a down payment, and other applicable fees. Your loan repayment is interest-only based on the amount of money advanced.
• Your allowable construction loan amount is determined by the cost of construction and the home’s appraised value. Home value is determined by a certified appraiser based on the house plans and specs you and/or your builder provide.
• Loan advances on a construction loan can be made up to twice a month.
Obtaining long-term mortgage financing when construction is completed is the final step, transferring from a construction to a permanent loan. Because an origination fee has already been collected on your new construction loan, we charge no additional origination fee when you obtain long-term financing through State Savings Bank.
• Your construction loan interest rate can be locked in prior to the completion of your home.
• Upon completion of construction, a final appraisal determines the value of your completed home.
• You can move in as soon as the city issues an occupancy permit, regardless of whether your permanent loan has closed.
State Savings Bank offers a wide variety of loan options to help you achieve your goals. From personal loans to home construction and home improvement loans, we’ve got you covered! We also offer a range of financial resources from loan calculators to checking and savings bank accounts, and special tax-advantaged savings account available to qualifying First-time homebuyers. As a full-service Iowa bank, you can trust State Savings Bank with all of your banking needs!
Our low home construction loan rates are competitive in our central Iowa market area, Polk County, Dallas County, Jasper County, and their neighboring counties. Use one of these convenient contact methods to connect with a State Savings Bank construction loan expert to schedule an appointment or discuss construction loan rates and other details.
Home Construction Loans Frequently Asked Questions
- What is the loan structure of a construction loan?
Construction loans are ‘closed-end lines of credit,’ meaning you advance money off the loan as you build the house. It is not a revolving line of credit like a credit card where you advance off the line, pay it down, and then advance off the line again. Payments on the construction loan are monthly interest only, so at the beginning of the loan you pay a smaller amount of interest than you do at the end when you have more money drawn off the line.
- How does a mortgage loan differ from a construction loan?
A major difference between a regular mortgage loan and a construction loan is the need for plans and specs of the house you plan to build. Plans are the building blueprint or drawing of the house; specs are the cost breakdown for its construction. For example, how much will the foundation cost? It is important to obtain the plans and specs as soon as possible in the construction loan process because your lender needs to give this information to an appraiser to determine the "as-completed" value of the house to be built.
A second difference is the way the money is disbursed. With a mortgage, funds are disbursed all at once when the mortgage is approved and the homeowner is ready to move in. In the case of a construction loan, the loan is approved before construction begins, and the money is disbursed in phases as construction progresses. Interest is only charged on the amount disbursed.
- Can I be my own General Contactor (GC)?
State Savings Bank does allow individuals to work as their own GC as long as they have relevant construction experience. A resume or proof of previous houses built may be required.
- How do construction draws work?
SSB requires invoices from the GC and sub-contractors for each construction draw as well as fully executed lien waivers on work previously completed. SSB lenders will also make regular inspections of construction in order to verify the work we are advancing for has been completed. This is done in order to protect both the borrower and the bank.
- At what point can I lock in an interest rate on my end loan?
In general, we recommend locking in the interest rate on your end loan (15 or 30 year fixed rate loan) when your house is 30 days from being 100% complete. The maximum interest rate lock period is 60 days, so the final 30 days of construction takes up the first half of the rate lock period and the second half of the rate lock period allows time for the appraiser and underwriting to take place. Communication between the lender, homeowner, and builder are very important in this phase to avoid paying interest rate lock extension fees.
- If I own my lot/land, does my equity count towards my construction loan down payment?
Yes. The equity you have in the lot/land you want to build your home on counts towards the 20% down payment required for the construction loan.
- What are my monthly payments on a construction loan?
Monthly payments on a construction loan are interest-only based on the amount advanced on the loan. In the beginning, your monthly payments will be less but will steadily increase as construction progresses and more money is drawn off the loan. You can calculate an approximate interest-only payment in the following way: Multiply the dollar amount advanced on the loan by the interest rate expressed as a decimal, and then divide that amount by 12. This is not an official calculation, it will not equal your exact payment and is not legally binding, it is simply a way for you to estimate what your construction loan payments might look like as your home construction progresses.