Consider obtaining an appraisal from an independent appraisal on the land before you sign the contract. This may ensure you’re paying a fair market price for the land. A piece of land that is too large or too expensive for the area can be difficult to finance.

Develop a budget allowance for your project. Get prequalified or preapproved for the mortgage necessary to complete your project. Consider applying for 10% more than you think you need. Upgrades and overruns are common, and you don’t want to run out of money.

Building a new home from the ground up is quite different then buying an existing home. Talking with Preferred Capital Mortgage Services during your pre-qual step is important. This will allow you to review financing options and help you steer clear of common construction pitfalls.

The construction portion of a construction/perm loan works in stages. The contractor, buyer and bank agree to a schedule of ‘draws’ in advance. A draw is payment for completion of a portion of the work. A typical draw schedule looks like this:

First Draw on completion of the home's foundation.

Second Draw on completion of a weathertight house shell.

Third Draw on installation of electrical, plumbing and HVAC systems.

Fourth Draw on completion of interior finish and trim and installation of appliances and bathroom fixtures.

Fifth Draw on completion of house, building and loan inspections.

Sixth Draw about 90 days after completion or after sufficient time for the filing of mechanics' liens.

You only pay interest on the amount drawn. The bank will require an independent inspection of the work progress before payment of each draw. This protects you, the builder and the bank.

You can calculate your monthly payment with this calculator.

The best structure is a Construction/Permanent Loan

This structure is called a 'one-step' or 'single close' loan. We provide both the construction financing and permanent financing in a single loan.

During the construction phase, periodic draw payments are made to the builder based upon work completed. Monthly interest payments are Billed to the borrower.

At completion, the loan modifies to a permanent loan. The construction interest rate and permanent loan rate can be locked to protect the buyer from increases in interest rates during construction.

The single-close structure has the following advantages:

A single lender is used throughout the process.

There may be local and federal tax advantages of a single step loan.

Closing costs duplication is minimized.

The interest rate during construction and the permanent loan rate can be locked.

Other options can be found in our Loan Features Section