Guide to Construction Loans in Beloit
Thinking about building a home in Beloit, you’ll want to apply for a home construction loan. Here's what you need to know about Beloit home construction loans.
Beloit is one of the best areas to live in Wisconsin. It has a rural charm and high quality of life while offering a growing metropolitan area within an easy drive of Milwaukee, Madison, Chicago, Rockford and beyond.
Everyone wants to find their dream home, but the housing market isn’t always going to match exactly what you’re looking for. There are other options—building a new home or remodeling your existing home. While this may feel out of reach for some, a Beloit construction loan can help you get started building your dream home in this picturesque location.
What is a home construction loan?
When you’re thinking about
building a home in Beloit or remodeling your existing home, you’ll want to consider a construction loan. These loans are short-term financing that covers the costs of building your property. There are several important factors to keep in mind when taking out a construction loan. A good place to start is understanding how they work.
How does a construction loan work?
Instead of receiving an upfront sum, your
home construction loan will pay out money to your contractor throughout the build once they submit proof of progress on the project. Land, labor, materials, and even building permits can all be paid for using this type of loan. You will start to make payments on your construction loan when funds are drawn and disbursed for work completed and approved by you, the builder, the title company, and the lender.
This process is different from a traditional mortgage, where you’ll receive a lump sum for a pre-built property and pay that loan off over the agreed-upon term, 15 or 30 years. Construction loans are for a much shorter period of time, usually around a year, to finance the build period.
There are two types of construction loans:
- Single close construction loans. These loans are construction-to-permanent loans that include both the construction costs and the mortgage for the house once it’s completed. You only have to go through loan closing once, as the construction loan will convert to a mortgage once the home is finished. This option allows you to lock in your interest rate and is one less thing to think about after construction is finished.
- Construction only loans. This is a standalone loan type that only covers the construction expenses. Once this is complete, you’ll still need to take out a mortgage for your new home. If you plan on selling your existing home once your new build is finished, consider waiting to apply for a new mortgage until you’ve sold so that you have a bigger downpayment.
Construction loan requirements
Before you can apply for a construction loan, you’ll need to have:
- Estimates from several contractors that outline the expected costs
- Building plans and blueprints for your home
- An estimated build schedule from the construction company, with dates that payments need to be made to the contractor
- An initial budget for the lender to determine how much you’ll need to borrow for your construction
- An executed construction contract for services.
Like a traditional mortgage, you’ll need to meet several financial requirements before applying for this type of loan. These include:
- Proof of your down payment
- A good credit score
- Documentation such as your government-issued ID, your address and previous addresses (depending on how long you’ve lived at your current address), employer information and pay stubs for the last 30 days, W-2 forms for the previous 2 years, and bank statements for the previous 2 months.
How to purchase a lot and combine a construction loan in Beloit
When you know you want to build in the Beloit area, you’ll get started by searching for the location of where you want your new home to be. Work with a realtor to find land in one of Beloit’s desirable subdivisions that works for you and your family.
Once you have found the lot you want to build on, you should start contacting local contractors to map out your initial home plans. They’ll draw up a contract and blueprints for your home.
With plans in place, your construction loan company will review your project proposal and go through the appraisal process like a traditional mortgage. Once this is approved, you’ll close on your lot purchase and home construction loan simultaneously. The following 12 months will constitute your construction phase. Construction will occur in phases, with installments approved for each stage. The contractor will submit documents to the construction loan company to receive payment for the work performed for each phase.
As construction wraps up, the building inspector will complete one final check and issue your occupancy permit once everything meets the required standards. Then, you can move into your dream home!
Build your new home today
First National Bank and Trust is here to help you build your future in Beloit, WI, and the surrounding areas. We proudly serve the
local communities of Southern Wisconsin and Northern Illinois, whether you’re looking for your first home or your forever home. If you’re ready to build or remodel a home, we’re here to help you. Get started with the
construction home loan process today.
Contact us or visit one of our convenient
branch locations in Beloit, Argyle, Monroe, Darien, Delavan, Janesville, Elkhorn, Clinton, Walworth, and Williams Bay, Wisconsin, and Winnebago, Roscoe, and Rockton, Illinois.