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How Do We Finalize Our Home Construction Loan?

| 3/2/2015 9:26:00 AM

Black Lab On Driveway

The Small Home, Big Decisions series follows Jennifer and her husband, Tyler, as they build a self-reliant homestead on a piece of country property in northeastern Kansas. The series will delve into questions that arise during their building process and the decisions they make along the way. The posts are a work in progress, written as their home-building adventure unfolds.

A funny thing happened to us last week. We were told we could borrow a sum of money that is larger than I can imagine. I tried to envision it all stacked up in neat rows, and how much space it would need. I couldn’t. But, that’s just as well — we are imagining instead the walls, roof, flooring, driveway, drilled well and built-in root cellar that will make up our future home. We’re envisioning the tangible outcome of borrowing money from the bank.

Below, we’ve outlined our loan process, but each bank will have different terms and you’ll obviously have your own financial circumstances to meet. Full disclosure: Tyler worked for many years at a credit union, and so getting a loan is one area we feel more confident in than, say, septic system installation.

The basic steps of getting a loan to build a house: loan application and review of applicants’ financials, loan pre-approval, estimate of per-acre land value, submission of building plans and construction estimate, request for additional applicants’ financials, appraisal, title work, final approval. After this, the loan paperwork is signed and the builder can begin drawing funds from the bank. Each lender has their own set of criteria and process. For example, we will end up with two loans: one for the bulk of the land (about 30 acres) and one for the construction/house along with the remaining acreage (about 10 acres).

Some questions, based on our experience, we recommend you ask before you take out a home construction loan:

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