Q: Why are construction loans a popular option right now?

A: It’s not surprising that some borrowers feel like there aren’t enough homes that meet their buying criteria in today’s competitive housing market! Building is a way to get the home you want without waiting. Volatile labor and material costs are also a factor.

Q: What’s the single best thing you want construction Loan borrowers to know?

A: Construction loans can be more complicated than a normal purchase, and many borrowers only use a construction loan once to build their forever home. That’s why our entire team is ready to take time to explain the process, review all the details, and support you from the first conversations to the final closeout.

Q: Can a construction Loan include the purchase of a lot or land?

A: Yes, Royal Credit Union construction loans may include financing the purchase of a lot as part of the loan. This works out well for most borrowers because they won’t incur another set of closing costs to finance the land separately.

Q: Do I need to have a builder and blueprints lined up to get a construction loan?

A: We often meet with borrowers very early in the process to start the conversation, before they’ve chosen a builder or selected plans. While you’ll eventually need to share your builder info, contract, and blueprints, a mortgage loan officer can help you determine if it’s financially feasible to build before you have those items.

Q: How long does it normally take to build?

A: We typically allow up to 12 months for construction to be complete, although each project and each builder are different!

Q: How does a construction loan turn into a permanent home loan?

A: Borrowers make interest-only payments during the construction phase. Funds are released to your builder over time to pay for materials and labor. Once construction is finished, the loan modifies to a permanent home loan, which can be a fixed-rate or adjustable-rate mortgage.

Q: How do appraisals work for construction loans when the home hasn’t been built?

A: Appraisers review your provided blueprints and project specifications to accurately appraise the completed home based on square footage, number of rooms, and the type of finishes like carpet, hardwood floors, and more.

Q: What happens if construction costs increase during the project?

A: This scenario is sometimes called an overrun. If you have enough equity in the project (meaning you’ve put enough money down), we can potentially finance overruns. Other times, borrowers rely on a cushion of their own funds to pay for these added costs.

Q: Can I apply for a construction loan online?

A: Yes, but our mortgage loan officers love meeting with borrowers in person to make sure they understand everything about construction loan timelines, documents, inspections, payments, and more. At the end of the day, borrowers don’t need to know it all — that’s our job to guide you through the loan!

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Learn more about Royal Credit Union construction loans at rcu.org/Construction. Loans subject to credit approval. Equal Housing Opportunity.