What is a construction loan and who is a good candidate for one?

Let’s start with a definition.  According to Wikipedia, a Construction Loan is any value added loan where the proceeds are used to finance construction of some kind.  Because it is designed for construction, the defining features of these loans include special monitoring and guidelines to ensure the project is completed so that repayment can begin to take place. 

Who needs a construction loan?

If you already own an approved building lot and are looking to build a home then a construction loan may be the type of loan you need.  At WVFS&L we understand that no two properties are alike.  We take the time to get to know you and your property so that we can work alongside you as you build your home and take it from a dream to a reality.  

What makes me a good candidate for a construction loan?

First, it is best if you own the property outright.  Also because loan advances are paid out once the work is completed in accordance with the preset advance schedule, you need to have some money saved to get your project started and to keep it rolling between advances.  The loan doesn’t close until after the foundation is in which means that all the starting costs will need to be fronted by you.  That means you will need to have money saved for the permits, survey, engineering and to put in the foundation.

What is an Advance Schedule?

The Advance Schedule is the schedule in which the loan will be paid out.  The schedule is reviewed with you in detail ahead of time so there are no surprises and we suggest that you share it with your general contractor.  If you would like to discuss the number of advances and inspections, give us a call.  We’d be happy to share them with you.  In general it would look something like this:
• Loan is closed after the foundation is poured.
• Next advance comes after the framing is complete
• Typically the next comes after all the installations are in (electrical, etc.)
• Final payment comes once the home is finished, has been inspected and the Certificate of Occupancy has been issued.

At Wallkill Valley Federal Savings & Loan, we understand that no two properties are alike.  We want to become your partner as you work to build your dream home.  Are you interested in finding out more about construction loans?  Cyndi O’Brien (NMLS# 754577) and Rick Farrow (NMLS# 800674) are available to answer questions and help you get started. To reach Cyndi O’Brien, call 845-946-6635 or 845-895-2051 ext 431.  For Rick Farrow, call 845-527-2090 or 845-895-2051 ext 426. â€‹

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