Build with a Strong Foundation: Why Financing Your Dream Home with the Right Bank Matters.

Build with a Strong Foundation: Why Financing Your Dream Home with the Right Bank Matters.

Building a home is an exciting adventure, but figuring out how to finance the project can be intimidating. Luckily, there's an option for those looking to make their dream home a reality: a home construction loan. With this type of loan, you can finance the construction of your home from the ground up. In this blog, we'll dive deeper into what a home construction loan is, how it works, and what you need to know to get started. So, let's get building!

Build the Team

Choosing the right bank to partner with on this project is just as important as choosing the right builder. Community banks like First National Bank of Sycamore are often better suited for construction loans than larger, commercial banks. This is because community banks have a greater understanding of the local market and the specific needs of local contractors and developers. Additionally, community banks often have more flexible lending criteria and are able to offer more personalized service to borrowers. Overall, community banks can offer a more tailored and efficient lending experience for those seeking construction loans.

Build the Financial Blueprint

So, you're ready to build your dream home. Perhaps you are just starting to look at floor plans and talking to builders; or maybe you've already planned out every detail down to the color of the front door. Either way, it’s never too early to start developing your plan to finance this project. Setting up a meeting with one of our mortgage lenders is easy and they will walk you through the process and work through the numbers with you. Whether you have an established budget, or you are trying to figure out where your budget needs to be for the project, our experienced lenders are here to help. With a quick review of your financials, (paystubs, W2s and tax returns), our team can help you layout the perfect financial blueprint for your project, breaking down timelines, closing costs and monthly payments.

Our Building Loan Process

With your financial blueprint in place, we work with your builder to establish the construction timeline and draw schedule that is needed to complete the project in a timely manner. Additionally, we ask your contractor to provide the construction contract and blueprints, which we use to order an appraisal on the project. The appraisal provides us with the expected value of the completed project, which dictates how much we can lend on the project. At a minimum, our borrowers can expect to have a minimum of a 15% down payment on their project.

First National Bank of Sycamore utilizes a single-closing construction loan. This means that borrowers will close on their loan before construction starts and that is the only closing they will have. This creates efficiency for you as the borrower, as it eliminates you from having to have another closing after the project is completed. This saves you money by avoiding a second set of closing costs.

At closing, all of the funds (loan proceeds and down payment money) is put in a construction fund. During the "construction phase" (typically the first 6-9 months) your contractor will request these funds in draws, and the bank will disperse them after inspections are completed. This helps to make sure the project is staying on task and within the previously established timeline. In this phase, your monthly payment will be an interest only payment. This is calculated based on the amount of funds that have been drawn out by the contractor at the time of billing. In the beginning of a project, payments are lower due to less money being used. However, as the project nears completion, the payment will increase as more funds are used. At the end of the construction phase, the loan automatically rolls into the regular principal and interest payment loan with a term of 15, 20 or 30 years.

Build with us!

When you finance your construction project with First National Bank of Sycamore, you get more than just a loan.  You get a trusted financial partner who is going to have your best interest in mind throughout the building process.  Our lending team is excited at the opportunity to work with you from day one of planning, to the day you move in and beyond.  If you are ready to build or thinking about building, give us a call and schedule an appointment with our team today.

First National Bank of Sycamore.  Member FDIC and Equal Housing Lender.