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Building your dream home? SouthStar Bank can provide the funding you need from raw land to construction and permanent mortgage financing.
“We are about to wrap up our second loan with Southstar. First was a land loan and the current is a construction loan I cannot say enough about what a fantastic job they did. They worked both loans and where extremely professional, went above and beyond to deliver and I would highly recommend them to anyone. Their communication and responsiveness was spot on.” ~James A.
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We’re your local community bank, committed to offering you the personalized service that ensures a smooth construction loan process. SouthStar Bank provides more than 100 years of lending expertise and was recognized as a Top Austin Mortgage Company by the Austin Business Journal. You can trust us to find the right construction loan solutions for your project!
The first step in building a new home is identifying the property. Through a raw land or lot loan, you can secure the site until you’re ready to build.
Land loan terms are typically 12 months or 3 years, depending on how much time is needed before converting to a construction loan, and are usually amortized over a 20 year payment schedule. The down payment you make on the land is typically used towards the down payment on the construction loan.
When planning your budget, remember to calculate expenses that will be applicable as soon as you close on the property, such as property taxes and loan payments on the raw land.
Once your plans and budget are finalized with your builder, you are ready to convert to a construction loan. A construction loan is a short-term loan, typically 12 or 18 months, depending on the size and budget of the home you are building. If you have a loan on your land, it will be rolled in with your construction loan. As mentioned above, we use the down payment on the land towards the construction loan and in some cases, lot appreciation may contribute toward required down payment.
Construction almost always requires non-traditional financing because unlike a traditional mortgage, funds are advanced toward a home that does not already exist. Because construction loans are more complex transactions than a standard mortgage, it is best to find a lender who specializes in construction lending and is experienced with the process.
Once you close on the construction loan, the funds for the build are disbursed in a series of draws as you complete different phases of the project. These draws are paid directly to your contracted builder after an inspection has been completed.
During the construction phase, you will continue making monthly payments on the loan, however, payments are interest only on the total amount drawn. At the end of the construction period, the loan is converted to a permanent mortgage.
SouthStar Bank makes these types of loan available to homeowners who want to create semi-custom or custom homes, as well as to builders who want to create turn-key homes for sale.
When planning to build your home, it is prudent to consider your options for long-term financing. This can be achieved either through a refinance after construction, or a single ‘one-time-close’ loan. It is important to work with a loan officer that will walk you through your long-term financing options before you begin your build so you know what to expect when it comes to your permanent mortgage.
With a one-time-close construction loan, completion of the construction and long-term mortgage financing are rolled into a single loan. This type of loan allows you to settle in to your new home and not worry about anymore paperwork. A one-time close can also save time and money by eliminating additional closing and appraisal fees.
Finally, and perhaps the biggest benefit of this type of loan, is that it seamlessly converts to a long-term, permanent financing mortgage when construction is complete. Thus, for many of our customers, this loan is the product of choice.
Lot loans and construction loans typically require a 650 credit score.
