By Zach Trout, Financial Services Officer, Ag & Rural Lending
Embarking on a new construction project can be an exciting journey, and understanding the financing involved is a crucial first step. FCS Financial offers comprehensive construction loan options to help you bring your vision to life.
What is a Construction Loan?
Unlike a traditional mortgage, which provides a lump sum for an existing home, a construction loan is a financing solution designed specifically for building a new property. These loans are disbursed in stages, known as "draws," as construction progresses. This process allows FCS Financial and you, the member-owner, to work together to budget the project, helping to avoid cost overruns and incomplete projects.
General Contractor or Owner-Builder?
While some member-owners may choose to manage their own projects, FCS Financial generally recommends utilizing a trusted and reputable general contractor. Their expertise, industry connections, and experience can help reduce stress, ensure timely completion, and maintain professionalism throughout the building process. If you choose to be an owner-builder, it's essential to understand the additional responsibilities and requirements involved to ensure successful project completion.
Interest Rate Options
FCS Financial offers both fixed and an adjustable interest rate options for construction loans. Whether you prefer the stability of a long-term fixed rate or are comfortable with the potential short-term savings of an adjustable rate, FCS has options to suit your risk tolerance. Furthermore, FCS Financial offers a unique ability to convert between fixed and adjustable rates on the same loan without requiring refinancing.
Associated Fees
Typical construction loans will have an origination fee, an appraisal fee, and a construction fee. The origination and appraisal fees cover the costs of starting the loan and a detailed appraisal to determine the project's post-completion value. The construction fee is for the work FCS Financial staff performs in organizing, tracking, and maintaining the construction workbook. This workbook acts as a budget and disbursement tool, alleviating the stress of managing invoices, tracking spending, and dealing with contractors and lien waivers. Your loan officer will provide a detailed breakdown of these fees.
Typical Timeline
From application to loan closing, a realistic timeline for closing a construction loan is typically 30-45 days. It is recommended to start the process early. Once an application is approved, appraisal completed, and title work provided, closing can be delayed for up to six months. Completing these steps in advance can lead to a smooth start and help avoid unnecessary interest expenses.
Zach Trout, NMLS #2516550, is a Financial Services Officer, Ag & Rural Lending, in the FCS Financial Chillicothe office. If you’re looking for an ag lender who understands the ups and downs of Missouri agriculture, reach out to an FCS Financial loan officer today.
