Thank you for your interest in Black Hills Community Bank’s construction loans. We are eager to help you achieve your goals in the most efficient way possible. Our construction loans consist of a construction loan phase and a permanent loan to replace the construction loan when the home is completed.
Below is an outline of what to expect moving forward.
This application will be used to qualify you for both the construction and permanent financing.
Builder: Builder needs to be approved by the bank. Self-builds are generally not allowed.
Contract: Do you have a contract, plans, specifications, and a budget for the project clearly identified?
- You will want to get started well in advance of when you are desiring to start construction and we will need to have your construction loan closed prior to any work being performed.
- When received we will process the file for approval. The appraiser will appraise the property using the plans and specs and will determine the value “as completed per plans and specs”.
Equity: Where will your equity injection come from? Equity injection will be determined on various credit factors and a minimum of 10% of total home costs will be required. Land equity may be considered.
Reserves: You may need to have a minimum of 10% in reserves (liquid assets) as collateral in addition to your equity injection.
Permanent financing: Be prepared to provide the required documentation to qualify you for the permanent financing that will replace the construction loan.
The bank will utilize the budget and any added contingencies to determine equity requirements, contingency reserves, amount of the construction loan, and ultimately use this information to obtain pre-qualification for permanent financing.
Construction loan:
- The construction loan itself is a draw down line of credit.
- You will be required to pay interest monthly on the balance drawn on the loan.
- When using the construction strategy with an approved builder the construction loans can go up to 90% loan to value.
- The contractor will give you the draw requests when they are ready for bills to be paid. This draw request is limited to twice a month. Additional draws may have an additional fee. By signing the draw request, you are authorizing the bank to withdraw money from your construction loan and this also means you have reviewed the construction draw request.
- After you have signed, the builder will pass it along to the title company for disbursing.
Permanent Financing:
- When you are within 60 days of completion, we start updating the permanent file so that it is ready when the home is completed.
- Most borrowers lock the loan during these 60 days, but we do offer extended rate locks on conventional loan types. I can send information on extended rate locks if you are interested in this information at this time.