Construction Loans

Loan amounts under the conforming loan limit of $806,500 are allowed up to 12 months to complete. Loans over this amount are allowed up to 18 months.

TVFCU encourages open dialogue between you and your builder to notify us if delays due to weather, suppliers, etc. exist and the home cannot be completed in the allowed time. Extension fees may be applied if approved.

A construction loan is a line of credit and a draw is an advance against that line for costs associated with building your home. An inspection is done to confirm completion of work to the home and the draw is requested to pay for that work.

Your loan allows for 12 or 18 draws depending on the loan size and complexity of the build.

The draw amounts for specific inspections are included in your loan estimate. If all are not used, the funds allocated are applied as principal reduction to your loan balance.

Draws are requested by the builder through a portal online or using our construction management app. Once submitted, an inspection is ordered and performed. TVFCU confirms the work performed in accordance with the builder’s estimate and disburses the funds. This process typically takes 72 hours.

A specific construction checking account is created for your loan. Please note this account is not to be used like an ordinary checking account and is only for the payment of funds for your builder. You will not be issued checks or a debit card.

When a draw is approved by TVFCU, the funds are deposited to the construction checking account. You can request a certified check to deliver to your builder. You can also pre-authorize TVFCU to draft a certified check for the builder to pick up in one of our branches.

TVFCU locks in your rate at the start of construction for both phases. You have the same rate while the home is being built and once construction is complete. During construction payments are interest-only, and once modified to the permanent loan, it becomes fully amortizing.

Payments are interest-only during construction and due on the 25th of each month. As draws are requested by your builder, the amount disbursed increases and your subsequent payment will increase as well.

To estimate your monthly payment, take the balance times the interest rate. Divide that number by 365. Then multiply the per diem interest by the number of days in the billing cycle.

For example: ($100,000 x 7.000% = $7,000 ÷ 365 = $19.18 x 30 = $575.34)

Yes, TVFCU allows for auto payments. Simply complete the auto payment form available upon request. Note that the payments will increase over the course of construction as the line balance grows with draw requests.

A fixed-price contract sets a lump sum cost for a project, regardless of whether expenses and materials go up or down. The builder must carefully calculate how much to charge to protect against a jump in material costs so that it doesn’t run over the loan funds or wipe out their profit.

A cost-plus contract is one in which the builder provides a detailed estimate for expected costs plus their fee and you and the builder agree to a set of recognized expense increases that may be incurred. Usually, increases are for fluctuations in items like lumber which may experience a spike in demand. To protect against estimating errors or underbidding a project, a cap may be requested on total chargeable expenses.

No. However, no work can be started and no funds disbursed until the permit is issued.

No. Under no circumstances is the builder allowed to start any work on the property until the loan is closed.

Yes, with proper explanation.

TVFCU will allow for up to 50% of the disbursement of funds for the material line item to be ordered when construction is at a stage where the materials would be needed or if an item is delivered on-site and confirmed by an inspection.

Payment for the item will go directly to the supplier and should be evidenced by an invoice from your builder.

A contingency reserve is a budgeted amount above and beyond your builder’s contract price to construct your home that is set aside for unforeseen cost overruns or material cost increases.

Your TVFCU loan officer will discuss your options for establishing the reserve account.

TVFCU understands that changes may need to be made during the course of construction. Any changes made to the plans or materials needs to be brought to our attention immediately and should not be made without talking to us first.

In some cases, TVFCU allows owner builds. For consideration, you must be a licensed general contractor and undergo a thorough review.

Once the building permits are in place, your builder can start working on your home!

Within a few weeks after closing, you and your builder will receive a welcome call introducing you to our construction lending team and setting you up in OneSite, our construction management platform.

During this call, we will guide you through the steps for requesting and approving draws, explain how funds are released, and how to track the progress of your loan as the balance increases with each phase of the build.

One of the benefits of the one-time close construction to permanent loan is the transition to the permanent loan phase.

As you approach completion, TVFCU will prepare the necessary documents for converting the loan. You or your builder will need to file the 10 Day Notice of Completion in Tennessee. The documents will be sent to you for execution, and we will modify the loan to the preselected permanent financing program.

Please note that if you are planning to escrow for taxes and insurance, you may need to fully fund your escrow account to ensure sufficient funds are available to pay the bills when they come due to the respective county, city, or insurer.