Best construction loan lenders in 2024
In This Article:
A construction loan helps finance the building of a home, from the land or lot purchase to the permits, labor and materials. This type of loan isn’t as easy to come by as a regular mortgage for an existing home, but many types of lenders offer them, including big banks. Here are our picks for the best construction loan lenders in 2024.
Best construction loan lenders
| Lender | Credit requirements | Down payment minimum | Bankrate Score | |
|---|---|---|---|---|
| New American Funding | 620 for conventional loans | 3% for conventional loans, 3.5% for FHA loans, none for VA and USDA loans | 4.8 | |
| U.S. Bank | 620 for conventional loans, 740 for jumbo loans | 5% for conventional loans, 3.5% for FHA loans, none for VA and USDA loans | 4.8 | |
| Wells Fargo | 620 for conventional loans | 3% for conventional loans, 3.5% for FHA loans, none for VA and USDA loans | 4.8 | |
| Flagstar Bank | 620 for conventional loans, 700 for jumbo loans, 580 for FHA loans | 3% for conventional loans, 3.5% for FHA loans, none for VA and USDA loans | 4.6 | |
| Old National Bank | 620 for conventional loans, 600 for FHA loans, 620 for VA loans | Undisclosed | 4.6 |
How to choose the best construction loan lender
Ultimately, the best lender for you depends on your goals, preferences and financial situation. Construction loans can be complex, which is why it’s best to work with a lender who has experience with this type of mortgage.
To find the best mortgage lender and get the lowest-cost loan, compare several construction loan lenders and their rates and terms, and also compare your interactions with them. If you’re looking for responsiveness, for example, take note of this in your communications with the loan officer.
How to apply for a construction loan
Applying for a construction loan is similar to applying for a mortgage on an existing home, with a few extra steps and likely a longer timeline. Here are the basic steps:
1. Review construction loan requirements
Construction loan lenders have varying requirements, but they are typically based on the amount you borrow. Similar to other types of mortgages, lenders determine your eligibility for a construction loan by evaluating your creditworthiness, income, debt-to-income (DTI) ratio and other factors. Here’s what to expect:
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Credit score – Many lenders require a credit score of 680 or higher for a construction loan, but some might work with borrowers with lower credit scores.
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DTI ratio – Lenders usually look for your debt obligations to total no more than 45 percent of your monthly income.
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Down payment – Be prepared to put down 20 percent or more, unless you’re applying for an FHA or VA construction loan.
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Construction plan – Lenders usually require a detailed plan before funding the first phase of the project.
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Repayment plan – In addition to the construction loan itself, you must also qualify for permanent mortgage financing. The construction loan covers payments for the project during the building process and then converts to a permanent mortgage upon completion.