The loan process for new home construction

These certainly are challenging times for anyone undertaking construction or home improvement projects. As a construction loan specialist at a local bank, I work mainly with new home construction. I work with our customers, as well as their building contractors, to make certain every aspect of the building process has been adequately accounted for. Once construction begins, I visit the site regularly to monitor progress. Simply put, my goal is to see our borrower move into the home of their dreams, finished, and on budget. That doesn’t sound too hard, but let’s take a closer look at the process.

Let’s assume you already have your building lot. I would advise you to start early, researching finance options. Have a discussion with your loan originator. That person will guide you through the lengthy construction loan process, and determine a budget that’s right for you. 

You’re going to need architectural plans. An architect will work with you on a floor plan and design, or, you may choose a builder who is capable of the design work.

Choosing the right builder is critical, because your choice will be the key to success of the project. Get customer references and check them. Talk to people you know in the area who may have had experience with the builder. Once you have chosen a builder, your loan originator will ask them to provide the documentation necessary to move your construction loan forward.

Good builders will help with permits and approvals. They can provide choices to suit your budget, and can give good advice. They will communicate well, answer questions, and keep you informed. They will make the construction of your home a memorable and pleasant experience. They tend to use subcontractors whom they’re comfortable with and can be relied upon. In the Lakes Region, I associate with many qualified building contractors and tradesman who are outstanding at their craft or trade.

Building a new home requires planning and coordination. The builder must coordinate timing of every phase of the project. From site work to finished flooring, and everything in between, things are done in a certain order. I caution against having unrealistic expectations of your builder, keeping in mind the difficulties home builders are faced with. Their subcontractors are busy and need to be scheduled well in advance. Lately, volatile lumber markets have blown budgets. COVID caused many industries to cease or cut back. Building and remodeling is booming, so building material shortages, and long lead times on items such as windows, kitchens, and appliances, present more challenges. This applies to those undertaking remodeling and home improvement projects of existing homes as well. There’s also a serious labor shortage in the construction industry, but that’s a story for another day.

For me, it’s satisfying to walk through a finished home performing a final inspection. I admire the detailed craftsmanship, custom features, and beautiful finishes I have seen. But with the additional challenges builders have endured this last year, I have a greater appreciation when seeing a finished home. When the process is complete, it is most satisfying when a new homeowner tells me they are pleased with both their new home and their builder. I’m happy to say I hear this frequently in the Lakes Region and surrounding communities.

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Your local home builders association is your best resource to find a member, hire a local professional or join the National Association of Home Builders. To learn more about Lakes Region Builders & Remodelers Association, visit lakesregionbuilders.com.