Construction Loans

Loans for construction do require more documentation than conventional mortgages. Construction loan options also typically require higher credit scores than those needed for mortgages, home equity loans, or other conventional loan types.

While many construction loan lenders will require 20% or more down for most construction loans, at TVFCU, we’re able to finance loans with as little as 5% down (95% financing) for qualified borrowers.

To qualify for a construction loan, you need to provide all the documentation required for a conventional mortgage, including:

• Proof of income and information about your expenses and existing debts.
• A signed contract with a registered builder, including details about the scope, specifications, materials, and cost of construction for your proposed building work.
• Proof of further savings to cover cost overruns or unexpected expenses during construction.

TVFCU requires interest-only payments on the amount you borrow during the construction, or draw, phase of your loan. Note that interest-only monthly payments will still increase as you borrow more money with each draw, unless you are able to make significant repayments of your principal during the construction phase. Construction cost overruns or unexpected expenses may need to be paid out of pocket.

Once construction is complete, you will need to make payments on both your loan principal and the accumulating interest charged to your fixed-rate loan.

Our 15, 20, and 30 year construction-to-permanent loan rates are determined by a number of factors, including the size of the loan being sought, as well as your credit score, income, and debt-to-income ratio.

Loans for house construction can be denied for several reasons. Common factors why construction-to-permanent loan lenders may deny funding include:

• Credit and debt issues.  Lenders typically want stronger credit and a manageable debt-to-income ratio.
• Lack of income stability. You must show steady income and the ability to manage your payments during construction and once full payments are due under your fixed-rate permanent loan.
• Insufficient down payment or reserves. You may not have the funds required to cover the down payment for which you qualify. You may also need cash reserves for overruns and unexpected costs.
• Incomplete plans or an underqualified builder. You need to provide detailed plans, a realistic budget and timeline, and work with a licensed builder that your lender approves.

Choose the No. 1 mortgage lender in the Chattanooga area! TVFCU’s loan officer team offers years of local experience with both construction and conventional mortgages in our neighborhoods. We understand Chattanooga, we understand construction, and we’re with you every step of the way on your journey from buyer to builder to happy homeowner.

Rather than working with a big commercial bank that does not understand your needs, keep your home loan local and enjoy superior hometown service for all aspects of your construction project!