Construction Loans
Whether you’re purchasing an office building, apartment complex, retail space, or other income-generating property, our commercial loan programs can help you secure flexible financing tailored to your investment goals.
What is a Construction Loan?
A construction loan is a specialized financing solution designed to fund the building or major renovation of a residential property. Unlike a traditional mortgage that offers a lump-sum payment for purchasing an existing home, a construction loan disburses funds in stages as work progresses. Here’s a closer look at its key features:
Key Features of Construction Loans
- Progressive Disbursements: Funds are released in phases and paid directly to contractors and suppliers as each stage of the project is completed.
- Interest-Only Payments During Construction: Borrowers typically pay only interest during the construction period, helping to manage upfront costs.
- Conversion to a Mortgage: Once the home is built or renovated, the loan can be converted into a standard mortgage, allowing for regular principal and interest payments.
How Do Construction Loans Work?
Construction loans follow a step-by-step process to ensure the project stays within budget and on schedule:
One
Loan Application:
Submit detailed building plans, budgets, timelines, and contractor information.
Two
Approval & Underwriting:
The lender reviews your credit, financials, and project feasibility.
Three
Loan Terms Agreement:
Interest rates, disbursement schedules, and repayment terms are finalized.
Four
Progress Payments:
Funds are disbursed in draws as construction milestones are reached.
Five
Loan Conversion:
Once construction is complete, the loan transitions into a permanent mortgage.
Types of Construction Loans Available in Richmond
Depending on your project and financial goals, different construction loan options may be available:
- Construction-to-Permanent Loan: Combines construction financing and long-term mortgage into one loan with a single closing.
- Stand-Alone Construction Loan: Finances only the construction; borrowers refinance into a mortgage after completion.
- Renovation Construction Loan: Designed for substantial home renovations and includes funds for both purchase (or refinance) and remodeling.
Construction Loan Requirements in Richmond
To qualify for a construction loan in Richmond, borrowers typically need to meet the following criteria:
- Good Credit Score: Lenders look for a strong credit history.
- Detailed Project Plans: Include blueprints, budgets, and a construction timeline.
- Down Payment or Equity: A down payment is generally required, often 20% or more.
- Verified Income: Documentation showing your ability to repay the loan.
- Licensed Builder: The project must be managed by a licensed, insured contractor.
