Building a Home
With a BB&T construction-to-permanent loan, you can combine your lot and construction financing in a single loan. And when your home is complete, we'll simply modify your construction loan to a permanent mortgage.
Best if you
- Want to build your primary or vacation residence, or make significant renovations to your existing home
- Need to buy the lot and finance the construction
- Would like the option to prepay without penalty
- Affordable, interest-only payments during construction
- Flexible fixed and adjustable-rate loan options
- No prepayment penalties
- One upfront closing with one set of closing costs provides the financing for the lot, construction and mortgage
How does it work?
A construction loan is a short-term loan—usually about a year—used to fund the construction of your home, from breaking ground to moving in. With a BB&T construction-to-permanent loan, your construction financing simply converts to a permanent mortgage when your home is complete. During construction, you only pay the interest on your loan, and your payments may be tax-deductible.1 And with one upfront closing and one set of closing costs, you'll save time and money. For construction loan rates, please consult your local mortgage professional.
1. Determine if your property is eligible
One of the qualifications of a construction-to-permanent loan is that your new home must be an owner-occupied primary residence or a second home. The property type must be a one-unit, single-family detached home. We also require that you use a licensed builder to construct your home. For a renovation project, please consult your local mortgage professional.
2. Get started on your loan process
When you are ready to begin the mortgage process, contact us. The process is not much different than a standard home loan. In addition to the usual required financial information, you'll also need to provide:
- A copy of the construction agreement with your builder, which must specify the cost of your home including options, upgrades and lot value, if the lot is being purchased from the builder
- A land contract for the lot on which your house will be built, if applicable
- A copy of the floor plan and facade of the house, if applicable
- A deed to the lot, if applicable
3. Close on your loan
After your loan is approved, we'll draft a loan commitment detailing the legal issues and requirements for your loan. You'll receive this document at closing, but will also be given a sample document to review in advance. At closing, you'll need enough cash to cover the closing costs and the minimum down payment.
4. Begin drawing on your loan
You'll pay the balance of the down payment at your construction closing. Funds are released from the construction loan based upon inspections of the completed work in progress.
What should I know about a construction-to-permanent loan?
A construction-to-permanent loan combines construction financing and mortgage financing into one loan.
Determine if your property is eligible
For a construction-to-permanent loan, your new home must be an owner-occupied primary residence or a second home. The property type must be a one-unit, single-family detached home, and BB&T requires that you choose a licensed general contractor to build your home. For a renovation project, please consult your local mortgage professional.
Understand the specifics
With BB&T, you'll benefit from mortgage experts who will walk you through the entire loan process, so that when the time comes, you'll be able to choose from a wide range of permanent loan options to find the one that fits your needs.
- BB&T does not require that you sell your existing home during the construction phase.
- If you have owned your lot for 12 months or longer at the time of your loan application, your maximum loan amount is based on the full value of the property, rather than the original sales price.
- You'll make interest-only payments on the funds drawn on your loan during construction.
- There is only one closing, which means only one set of closing costs.
Generally, BB&T will require four to six inspections of your home during the construction phase. The total cost for inspections is predetermined with your builder, and the funds are disbursed at time of closing to cover this amount.
Know your upfront costs
As with a standard mortgage, you'll need to have the appropriate down payment and funds to cover the closing costs.
It's fairly common for homeowners to make modifications or upgrades to their original plans during the home-building process. Consider whether you'd like to have this flexibility and plan accordingly—the homeowner is responsible for any cost increases that result from changes. Consult your BB&T Mortgage Professional for more information. Restrictions may apply.
Complete your application
When you're ready to start building, contact us, and a BB&T Mortgage Professional will walk you through the details. The process is similar to the standard home loan process. In addition to the usual required financial information, you may be asked for a:
- Copy of the construction agreement with your builder, which must specify the cost of your home including options, upgrades and lot value
- Land contract for the lot on which your house will be built, if applicable
- Copy of the floor plan and facade of the house, if applicable
- Deed to the lot, if applicable
Once we receive all the documentation, a decision is typically made within 48 hours.
Begin drawing on your loan
After closing, any remaining down payment money will be paid to your builder to start construction. Once these remaining funds are exhausted, you can begin drawing funds from your construction-to-permanent loan to pay construction costs.
Before the first draw on your loan, you'll need to provide BB&T Home Mortgage with a copy of a standard 12-month prepaid homeowner's insurance policy. It must include "builder's risk coverage." This coverage protects you from financial responsibility for any damage, theft or liability that may occur while your home is under construction.
You won't need to make interest payments until you begin drawing on your loan.
What should I consider before building a new home?
Building a home doesn't have to be overwhelming. Knowing what to expect will help simplify the process.
What's your budget?
To know your budget, you should contact a mortgage professional about construction loans. Together you can determine how much you'll be able to spend.
Keep your household budget in mind, too. You may not want to borrow as much as the lender is offering—you'll need room for other monthly expenses after you move in.
Where do you want to build your home?
When you're choosing a lot, look into its zoning. Local ordinances can affect the type of home you can build, where you can build it, whether you can have additional structures, and more.
If you already own your lot, good news: You can use it as equity when you set up your financing.
Who is your builder?
You'll need a licensed builder to get a construction-to-permanent loan. Be sure to verify their licenses, check references and speak with them about your plans. By vetting the builder, you'll increase your comfort level and decrease your exposure to legal complications.
Incidentally, BB&T requires homeowners insurance that includes builder's risk coverage. This helps protect you while your home is being built.
What kind of loan do you want?
BB&T offers construction-to-permanent loans for new home construction and renovations.
With a single closing, you can buy your lot, pay your builders and convert to a permanent mortgage after your home is built.
Ask your loan officer about the best fixed-rate and adjustable-rate options available for you.
When do you lock in your interest rate?
Our construction-to-permanent loans offer a huge advantage: you set up your loan details up front. You'll have the security of knowing your interest rate before the up to 12-month construction period begins.
How much will you spend during construction?
After paying closing costs, you'll only pay interest on the amount of your loan you've used to date. If you change your building plans during construction, you'll need to pay for cost overruns. Although your loan amount cannot be increased at this point, we can try to help you find a solution.
What happens during construction?
- Your builder will have scheduled draw payments for completed work
- You'll have four-to-six inspections of the home as it is being built
When can you move in?
After the final inspection, you'll receive your certificate of occupancy. Then you're all set to move in—and since the home is complete, your loan will convert to a permanent mortgage.
Ready to get started?
Not convinced a construction-to-permanent loan is right for you?