Earlier this month, we wrapped up our spring construction seminars. These in-person and online sessions allow our team of experts to share their knowledge and insights into the home construction process. Our goal is to help you make informed decisions as you navigate the journey of building your dream home! If you didn’t get the chance to attend one of our seminars, here are some of the most frequently asked questions we received and our answers.  

Timelines for Pre-Approval & Construction 

Q: How long is my pre-approval for a home construction loan valid for? 

A: Credit reports and pre-qualification are valid for 90 days. After loan approval, borrowers generally have another 90 days to close. The total timeline from application to closing may be up to 180 days depending on the timing. 

Q: How soon should I start the loan approval process? 

A: Ideally, borrowers will begin taking steps before closing on their loan – about 60-90 days before construction begins. This will give your financial services officer time to help you estimate the affordability of the project and plan construction costs. 

Q: What is the timeline for completing the construction of my home with a loan from GreenStone?  

A: Construction loans with GreenStone are structured within a 12-month build period. 

Q: What happens if the construction of my home takes longer than 12 months? 

A: Principal and interest payments begin at the 12-month mark. If construction goes past 12 months, borrowers can request a 90-day construction agreement extension. Extensions allow you to continue requesting draws during construction and typically have a fee of 0.25% of your loan amount. 

Q: When is the construction of my home considered complete? 

A: Construction of your home is considered complete once you have a Certificate of Occupancy and GreenStone has completed the final inspection. 

Construction Costs

Q: Why does GreenStone recommend a $180 per square foot minimum for my DIY construction project? 

A: The $180 per square foot minimum for DIY construction is intended to ensure there are enough funds set aside to build the home. Similarly, the recommended minimum when building a contracted home is $200 per square foot. 

Q: How do I calculate the value of my construction project’s square footage? 

A: To calculate your project’s square foot value, divide the total contracted amount price listed on your sworn statement by your build’s total number of square feet.  

Q: Does the square foot value of my project include the value of the land, garage, or basement? 

A: No, the value only applies to the livable square footage of your project, not the land value. Unfinished spaces, such as garages and basements, are generally not factored into the per-square-foot calculation. 

Construction Loan Draw Process 

Q: What is a construction loan draw? 

A: A draw is a request you or your general contractor will make to GreenStone to release the funds needed to complete the next step in the construction process. 

Q: How are draws scheduled?  

A: Draw requests will be submitted using a sworn statement outlining the expenses. If you are acting as your own general contractor, you will work with your GreenStone construction disbursement specialist to request the funds for each line item listed on your sworn statement. 

Q: How do I request a draw myself for a DIY construction loan? 

A: To request a draw, you will need to submit your updated sworn statement form as well as any lien waivers from previous draws. This documentation verifies work that has already been completed so GreenStone can release the funds for the next step in the construction process. Watch this informative video on how to request a draw! 

Using Equity, Land, and Other Assets 

Q: Can equity from another property be used for my down payment on my construction loan? 

A: Yes, you can use additional real estate as collateral to help meet down payment requirements.  

Q: Is land included in my appraisal of the construction project? 

A: Yes, land value is included in your appraisal and loan-to-value calculation. 

Q: Can a land loan from another lender be rolled into the construction loan? 

A: Yes, existing land loans from other institutions usually must be rolled into the construction loan at closing.  

Paying Interest and Rate Conversions 

Q: Will I pay interest on my full loan amount during construction? 

A: No, you will only pay interest on the funds that have been already drawn for the construction project. If no funds have been used yet, little to no interest is owed. If land loans or initial draws are included at closing, interest would begin on those amounts immediately.  

Q: How will my down payment affect interest charges? 

A: Down payments are used first before loan funds, meaning borrowers do not pay interest on their own money. 

Q: Does GreenStone offer interest rate conversions? 

A: Yes, an interest rate conversion is available for qualified borrowers. The fee for an interest rate conversion, is generally about 0.25% of the loan balance, and your financial services officer will help evaluate whether a conversion provides enough rate savings to justify a fee. 

Loan Management After Construction 

Q: Are there any prepayment penalties? 

A: No, there is no prepayment penalty. 

Q: Can I make a large payment on my construction loan after selling a previous home? 

A: Yes, borrowers commonly sell their previous home after construction and apply the proceeds towards the construction loan. 

Q: Can my construction loan be re-amortized?  

A: Yes, loans can be re-amortized to reduce monthly payments after a major principal payment. This process typically does not include any additional fees.  

Patronage and Member Benefits of Working with GreenStone  

Q: What is Patronage? 

A: Patronage is the return of a significant portion of our profits back to our members in the form of Patronage dividend checks. Learn more here!

Q: What amount can I expect to get back in Patronage each year? 

A: Your Patronage payment is based on the net interest income earned on your loan by GreenStone. Return amounts vary, but often effectively reduce a borrower’s interest rate by about 0.5-0.75%. 

Q: How will I be supported by GreenStone through the home construction process? 

A: We have decades of experience in home construction financing to help bring your plans to life. As your trusted financial partner, GreenStone will never sell your loan. Our dedicated team of experts are here for you every step of the way from loan application to final payment! Click here to contact your local GreenStone branch.

The journey of turning your dream home into reality can be both exhilarating and overwhelming. Whether you’re just beginning to explore the home building process, or you’ve already laid out your plans, navigating the numerous choices can be a daunting task. We are here to help you each step of the way! 

Be on the lookout for future construction seminars near you.