A Self-Build Construction Loan is unique in the lending arena because it’s hard to find a bank that will allow for self-building within their construction loans.
Kalamazoo County State Bank (KCSB) has one of the most flexible Self-Build Construction Loan programs in Michigan. With a KCSB Self-Build Construction Loan, you can work with your builder, tackle some of the work yourself, or self-contract the entire project. KCSB will work with you, your builder, contractors, and subcontractors to make this a completely doable project and get you into the home your always dreamed of building.
Here are some steps to get a Self-Build Construction Loan. These steps are not in a strict order. However, each step is important in the overall process of getting your Self-Build Construction Loan.
Secure Your Land
It’s not unusual to do this step later. But this has proven to slow the process down because it can take a little longer to find the right land. Here are some things to keep in mind.
- You’ll want to check with the township to make sure the type of home you want to build is allowed.
- Make sure the land is not in a flood zone and the water table will allow you to build the type of construction you want.
- If you need a loan to purchase the property, make sure you have pre-approval for financing as land loans usually require more down payment and have higher interest rates. (Note: KCSB can provide a land loan which is typically paid off with your construction loan.)
Apply for Self-Build Construction Loan
A good rule of thumb, any time you want a mortgage, is to get pre-approved. So talk to your lender right away about getting pre-approved for your Self-Build Construction Loan. Here are simple steps you’ll take for your pre-approval.
- Complete a mortgage application.
- Make sure to include all financial information requested and any other documentation required. Missing information only slows the process down for you.
- Provide proof of ownership of land or contract to purchase.
- Supply a contract to build, construction budget, draw request, cost breakdown for each specification, and blueprints of the home to be built.
- Include documentation that the proposed home meets all municipal, zoning and subdivision requirements.
Provide Builder, Suppliers, Contractors, Subcontractors Information
Although KCSB cannot warrant the work of any of the trades people you will be contracting with, we do want to know who they are before we grant a Self-Build Construction Loan. You will receive a form from us requesting information on your builder, supplier, contractors, and subcontractors. This will need to be completed and returned to us prior to approval.
How Funds Are Disbursed
At closing of your Self-Build Construction Loan, we can advance money to pay for the land (with your down payment) or any balance owed, and the closing cost. Your own funds will be used to start the construction process. The first draw usually will not take place until the foundation is in place and a mortgage survey has been completed to confirm the correct placement of your home. Our policy is to disburse funds for work that has been inspected as being complete.
Loan Payments
Your monthly Self-Build Construction Loan payments are based on an interest only term calculated at the rate specified in your mortgage note. The interest is billed to you monthly and is calculated on the daily outstanding balance of your loan. This amount must be paid monthly, and no additional draws will be allowed until payments have been made.
Change in Plans
As the holder of your Self-Build Construction Loan, KCSB must approve any changes made to your original plans. If a change will result in an increased budget, or if your request for a disbursement exceeds the available amount, it is up to you to make up the difference with KCSB.
Proof of Insurance
KCSB will need to see proof of Builder’s Risk Insurance from your builder. If the home is being constructed in a flood hazard area, you must provide proof of Federal Flood Insurance. You will also need to have your own individual Homeowners Insurance with a construction clause and listing KCSB as loss payee.
For more information on how you can finance a Self-Build Construction Loan, call your home construction lending experts at KCSB. KCSB is one of the few lenders who offer the ability to self-contract and allow for partial work with their construction loan.
To learn more about KCSB’s Self-Build Construction Loan program, call 269.679.5291 or visit one of our branch offices. See https://kcsbank.com/locations to find a location most convenient for you. Discover the most flexible construction lenders in Michigan, today!
Kalamazoo County State Bank is an Equal Housing Lender.