Construction Loan FAQ's
Commonly asked questions about Construction Lending
How much can I borrow?
How much you can borrow depends on the appraised value of your home after construction. Construction loans are structured on a projected future value based on the builder’s plans and specifications. The appraiser will measure the current home as it is, the planned improvements, and any comparable sales available to arrive at the future value of the home. Depending on the loan program you choose, you may be eligible to borrow up to 85% or 95% of the future value.
How do I start the loan process?
The first step in the loan process is to get pre-approved for financing. During this time, you may also begin designing and pricing your home plans with Willow Homes. To start the preapproval process with McGowin-King click here. Our Clients find that working with a loan officer and the builder simultaneously is the best way to end up with a Home Plan they love and that also fits their budget parameters. McGowin-King’s role is to provide payment, financing options, and fee estimates based on your design plan, so you can collaborate with Willow Homes to make adjustments as necessary.
How long does the loan process take?
The financing aspect of renovating or building a new home takes about 3 weeks to 30 days from the time you finish your design plans and sign a build contract with Willow Homes.
Will I recoup my investment?
There’s no exact formula to know how much equity you’ll have in your new home (or newly renovated home). The team at Willow Homes is very familiar with home values throughout greater Birmingham, and the locally based appraisers from McGowin-King Mortgage will give you a well-researched value. You and your loan officer will determine how much you want to borrow, and you can decide on the front end if you’ll be comfortable with the projected end position for your equity in the home.
What kind of paperwork will I need?
Aside from plans and specifications from Willow Homes, you’ll need income docs (tax returns, W2s, pay stubs), assets docs (bank statements, investment accounts), identification (driver’s license), and a credit report.
Do I need reserves?
Most construction loans require you have at least 10% of the cost of construction either built into your loan or brought to closing. These are contingency reserves that are used to make up the difference in the event of any cost overruns. If you build the reserves into the loan and don’t use the funds, they’ll go towards paying down the loan balance. If you bring the reserves to closing they’ll be returned to you plus interest when the project is complete.
McGowin King Mortgage is our preferred lender and comes highly recommended by Willow Homes. Contact Warner McGowin today to learn about their exclusive offer for Willow Homes clients.
