Skip to main content

What You Need to Know About Construction Loans

Construction loans are a particular type of financing used to fund custom home-building projects. Although the process of constructing your dream home can feel overwhelming, the Bank of Old Monroe is here to help. Our experienced lending team can assist you with a flexible construction loan suited for your needs.

Our community bank has helped families finance what’s important to them since 1906, and we’ll do the same for you. Contact our expert lenders to begin the process of building your dream home!

Contact Our Lending Team Today
Construction of New House

Contact Our Lending Team

Matthew Bals
Moscow Mills

Email

Matt Daniels
Wentzville

Email

Matt Arnold
Old Monroe

Email

Maggie Schulte
O’Fallon

Email

Dalton Gilbert
Troy

Email

What Are Construction Loans?

Construction loans are short-term, fixed-rate loans used to cover the costs associated with building a new home.

How Do Construction Loans Work?

In addition to required financial documents, you must obtain specific documents for approval, such as thorough construction plans, a detailed timeline, and an itemized budget.

Borrowers are able to draw from the loan based on the construction project’s stages. For instance, when the contractor or builder finishes your home’s foundation, our bank issues the necessary funds to cover the next step. You then only pay interest on the amount disbursed as the project progresses.

During the process, we will visit the construction site to monitor progress based on the timeline.

Construction loans typically cover the following items:

  • Cost of land
  • Materials
  • Contractor labor
  • Permits

Bank of Old Monroe’s lending team ensures you understand the construction loan process and your responsibilities. When the builders finish your home, we’re here to help you choose the competitive permanent financing option that works for you.

Construction Loan Requirements

Generally, home construction loans have more stringent requirements for approval compared to traditional mortgages.

  • Credit History: Showing lenders you will complete each payment on time increases your likelihood of approval.
  • Debt-to-Income (DTI) Ratio: The lower the comparison between all your monthly debt payments and gross income, the better.
  • Proof of Sufficient Income: Ensure you have enough income to cover your current debts and new loan payments.
  • 20-30% Down Payment or equity in the property will lower the amount you borrow and decrease payment and interest totals.
  • Detailed Plans: Present a detailed plan created by the construction company that outlines each step and how much it will cost.
  • Estimated Cost Breakdown: Any fees associated with the cost of the home. For example, finish grading, any applicable permits and foundation work. 

How to Obtain a Home Construction Loan

The first step in obtaining a construction loan, although not required, is obtaining a pre-qualification because doing so gives you an idea of how much you can borrow. Plus, it can help you save on expenses associated with blueprints for a home you can’t afford.

Next, find a reputable builder or contractor. The company you choose should have the experience to complete the project according to the timeline and specifications. You may want to request copies of the builder’s insurance certificates, résumé, business license, and financial statements to prove their trustworthiness.

Finally, gather documents such as contractor references, your detailed plan and project timeline, and the contract between you and the construction company.

Apply for a New Construction Loan Today

Obtaining the funds needed to build the home of your dreams is possible with the Bank of Old Monroe! Our lending team can help qualified borrowers bring their vision to life with a short-term, fixed-rate construction loan. Contact us for more information and to start an application!

Contact a Bank of Old Monroe Lender Today

Timeline

Construction loan timelines differ from one lender to another and from one borrower to the next. When you submit your loan application, detailed plans, and cost breakdown to the Bank of Old Monroe, our lending team orders the title search and appraisal. We advise you not to acquire more debt during this process. Generally, it takes 30 days to close the loan after the application is approved.

We Offer Mobile Banking

Manage your finances on the go with the Bank of Old Monroe app! Our app allows you to view transactions, transfer funds, pay bills, deposit checks and more! To discover all the ways our app can benefit you, visit your app store and search “Bank of Old Monroe” to download.

Apple Store Disclaimer
Android Store Disclaimer
Close Menu
  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.

  • Third Party Site Disclaimer

    By accessing the noted link you will be leaving Bank of Old Monroe’s website and entering a website hosted by another party. Bank of Old Monroe has not approved this as a reliable partner site. Please be advised that you will no longer be subject to, or under the protection of, the privacy and security policies of Bank of Old Monroe’s website. We encourage you to read and evaluate the privacy and security policies of the site you are entering, which may be different than those of Bank of Old Monroe.