Financial Matters: Construction Loans

PORTSMOUTH, Va. (WVBT) - Steps and Procedures for Construction Loans

What if someone is interested in building a home rather than buying an existing one; what should they do first?

- Get pre-approved, determine how much you qualify for to build with

- If you already own your land we may be able to loan you the total construction cost since you have the equity in the land

What should someone do when choosing a builder?

- Do your homework…before choosing a builder

- Get references from the builder, go out and look at properties they have built

- Talk to the homeowners about how fast the builder fixed items after they were in the property

- Make sure the contract covers everything...clearing of the lot, driveway and etc.

- They must be a Class “A”

If someone has been approved and has chosen a builder how does the builder get paid during the construction process?

- We at Bayport require the builder to provide us with a Draw Schedule, which breaks down the construction process usually into 6 to 8 stages. Once a stage is completed we send out an inspector to verify the work has been completed and check title to make sure there weren’t any liens put on the property since the last draw before any funds are disbursed.

Once the construction loan is completed do the members have to close again on the permanent loan?

- At BayPort Credit Union we have a one time closing on our construction loans; once the construction has been completed your loan would covert to a permanent loan, unless you want to change your loan type. The benefit of this is you avoid paying closing costs.

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