Our construction program offers you maximum flexibility without incurring additional fees and charges. Because our Construction program is a "one-time-close, construction-to-permanent" loan, borrowers are only required to go through one approval process, one closing, and pay one set of closing costs. Our Construction program also can accommodate changes to your building project and provide you with great permanent financing options. Your payments during the construction process are interest only on the loan balance drawn, keeping expenses low during your construction.

Every project is different, but in general, a construction loan pays for:

• Land
• Plans, permits, and fees
• Labor and materials
• Closing Costs
• Contingency reserves (in case the project costs more than estimated)
• Interest reserves (if you don’t want to make interest payments during building)

When you borrow money to build a house, there’s no collateral to back up the loan the way there is in a traditional mortgage — at least not yet. This is why there are additional steps involved in a construction loan as opposed to a traditional mortgage. Expect a thorough inspection of the architectural plans and your builder, as well as your finances.

Disbursement of a construction loan also works differently than with a traditional loan. Instead of transferring a lump sum, lenders pay home construction loans to the builder in installments, called “draws.” Each draw coincides with an important phase of the project, such as pouring the foundation, framing and finishing work.

An inspection is required before each draw disbursement to the builder. The amount of the disbursement is based on the work completed.

A mortgage is usually a transaction between a lender and a borrower, but construction loans add a third party to the mix: the builder. Your contractor is responsible for the completion of your construction plan on time and within budget.

Hire carefully when selecting your contractor. Review the contractor’s references and recent work they’ve completed. Check with your local builder’s exchange or associated for a list of licensed contractors. Make sure their plans and specifications are approved by the local building authority and a timeline has been agreed upon for completion.

Members 1st may request your builder’s work history and proof of insurance, plans, specifications, material list, a detailed budget, and a signed construction agreement that includes start and finish dates.