There are a few differences between a construction loan and a conventional home loan. So regardless of any previous homebuying experience, when you’re considering whether to build your next home, rather than buy, it’s good to be aware of the construction loan closing costs upfront, so you will be ready to make the right home loan choice for your financial situation. Here are some of the costs you can expect when it comes time to close on your home construction loan.
There are some closing costs that you can consistently expect, whether you’re building a home or buying one. Most mortgage lenders will require you to pay for a credit check and title work, in addition to any taxes levied by the local government, as well as any application and processing fees the lender themselves might charge. You can anticipate charges like these on many types of home loans, including refinances.
One of the places where construction loans differ from conventional home loans is when determining the value of the home. While purchasing a home, it’s very common for a lender to charge you for an appraisal, or third-party valuation of your new home. Since there is no home to appraise yet, when applying for a home construction loan you may instead be required by your lender to pay for an initial appraisal of the lot, in addition to a final inspection of the home once your build has been completed.
Once you have gotten in touch with a lender like The Federal Savings Bank about your home loan options, and submitted a loan application, your lender will provide you with a loan estimate for your construction loan. On the second page of this document, you may view your “Closing Cost Details.” These will be broken down to include third-party services you have the right to shop around for.
New loan estimates may be issued periodically during the application process, should a documented change occur. For the most up-to-date information on your home loan closing costs, you may consult your most recent loan estimate or closing disclosure, which is a final document that serves the same purpose: clearly outlining the terms and costs of your home construction loan.
For further information on your home construction loan options, consult our free Learning Center for prospective home builders, which covers topics like qualifying for a land and construction loan, or further differences between construction loans and purchase mortgages. However, there’s no substitute for the real-world knowledge that a member of the team at The Federal Savings Bank can offer you. Speak with a loan officer at 877-788-2520 today for a consultation, with no commitment– it could be the first big step you take toward building the home of your family’s dreams.
Subject to credit approval. Terms and conditions may apply. Property insurance is required on all loans secured by property.