Building your dream home from the ground up is an exciting endeavor.

A construction loan is an essential tool in turning blueprints into reality for many aspiring homeowners.

“In this market, when there are not a ton of houses out there for sale, sometimes it can be a nice option to purchase a piece of land and to build instead,” said UnitedOne Mortgage Specialist Kari Johnsrud, NMLS # 441414. “You’ll get the home that you want the way you want it.”

The Local Home Loan Experts at UnitedOne Credit Union delve into what a construction loan entails on the latest edition of their podcast, At Home on the Lakeshore.

A construction loan covers both the interim building phase and the permanent loan once the home is finished, eliminating the need for multiple loans.

The first nine months of the loan, also known as the draw period, disburses funds to contractors or subcontractors during the building phase. This period features a lower rate, interest only payment on outstanding balances plus property taxes if applicable. 

Once the house is finished, the loan rolls automatically converts to an ARM loan/permanent financing (for primary residence/second homes only).

One of the biggest benefits of a construction loan is it features a one-time close.

“The one-time close that we do offer here saves you money in that construction-to-permanent phase,” said UnitedOne Mortgage Specialist Linda Serrano, NMLS # 441416. “That’s something we love to do for our members to save them money.”

If you haven’t purchased the lot you plan to build on the initial draw disbursement in a construction loan will include the payoff of the land.

“Some people purchase the land first and pay on it for a while before they choose to build, and that’s OK, too,” Johnsrud said.

Construction loans also can be an excellent option for bigger remodeling projects to an existing home, like adding a second floor or changing layouts of a house.

Whether you’re planning to build new or do an extensive remodel, it doesn’t hurt to start doing your research now on prospective builders if you anticipate doing a construction loan in the upcoming years.

“It’s not too early to start,” said UnitedOne Mortgage Specialist Julie Peot, NMLS # 441412. “I know there are already some builders looking for builds in 2025. It’s not too early to start talking through options because it’s going to take time to get everything you’re looking for.”

By meeting with UnitedOne’s team of Local Home Loan Experts in Manitowoc and Sheboygan, aspiring homeowners can embark on their home-building journey with confidence knowing they have the financial support to bring their vision to life.

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