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Whatever your construction ideas are, we are all here to help you through the process! Give your financial services officer a call and let them put their experience to work for you!

Construction Loan FAQs

By: James Cole

Spring has sprung; at least I hope it has by the time you are reading this article. This is the time of year when many begin to have thoughts of constructing their own home. Naturally, it is also the time when many questions are asked related to construction financing. 

Do I need to own my land free and clear to obtain a construction loan?
The short answer: no. A construction loan can be used to purchase land or to pay off a current lien on the property. If you do own your land free and clear, the equity in the land could be used toward the down payment.

What sort of down payment is required?
It is common to plan for a down payment of 20 percent. This can be obtained in several ways. Most simply, it can be paid in cash. As mentioned above, if there is equity in the land, it could be used for the down payment requirements. However, if there is some equity in the land, but not enough to satisfy the full down payment, a combination of cash and equity can be used. One thing to keep in mind if you purchased the property less than 12 months ago, only the maximum purchase price value can be used toward equity, regardless of the appraised value.

Do I need to hire a licensed builder?
GreenStone does not require you to have a licensed builder, as we have “Do It Yourself” construction programs.  If you are new to home construction and would like to build the home yourself, you may want to consider consulting with a licensed builder to determine the appropriate steps to get your project going. Keep in mind, lenders will require an overrun account for construction material and labor. The percentage required for the overrun may be greater for an individual building their own home without home builder experience.

Is it OK to do some of the work myself?
Some people would like to do a portion of the work themselves in order to save money, or because they are especially handy at a certain portion of the building process. This is perfectly acceptable for some lenders, including GreenStone. However, when cost estimating the entire project, we will require it to be based on the cost of hiring all the work, even if you are planning to do a portion of it yourself. Unexpected situations arise; this will ensure that if for some reason you are not to be able to complete the work yourself, there are enough funds left on the loan to hire completed contractor to complete the project.

James Cole is a financial services officer based in GreenStone’s Howell, Mich., branch. He has more than 14 years of lending experience and recently received a platinum Circle of Excellence award through GreenStone for his superior performance in 2013.