Handling the financing for a new construction home in Atlanta can be quite challenging. We understand, because we've faced it ourselves! Through our research and experiences, we've gathered some valuable insights that could help you on your journey to securing your dream home.
In this article, we'll walk you through each step of obtaining a construction loan in Atlanta... Let’s explore!
Overview of New Construction Loans in Atlanta
New construction loans help you build your dream home from the ground up. Compare different lenders in Atlanta to find the best rates and terms....
Key features of construction loans
Construction loans have some unique features that make them stand out. They often offer single-close options, meaning you only close once for both the construction and permanent financing.
During building, we pay interest-only payments which helps manage costs.
Loans can be fixed-rate for 15, 20, or 30 years. Construction-to-permanent loans convert to a regular mortgage after the home is built... no need for another closing! There are also short-term stand-alone loans just for the construction phase—up to $10 million.
Managing costs during construction can help save in the long run.
Terms like adjustable rate mortgages or fixed-rate mortgages come into play depending on what suits your needs best.
Steps to Obtaining a Construction Loan
First, get pre-qualified by your chosen lender. Then, complete the application and wait for approval....
Pre-qualification and application
Let's make the pre-qualification and application process simple. Here’s a step-by-step guide to get started:
- Check Credit Score
- Ensure you have a minimum credit score of 660.
- Use online tools or contact your bank.
- Business Entity
- Form an LLC, Limited Partnership, General Partnership, Corporation, or Trust for the loan.
- Consult with legal advisors if needed.
- Application Fee
- Prepare to pay a $200 fee when applying.
- This is non-refundable and required upfront.
- Gather Financial Documents
- Collect tax returns, bank statements, and income proof.
- These documents show your financial health.
- Fill Out the Application
- Complete forms provided by your chosen lender in Atlanta.
- Provide accurate and detailed information.
- Credit and Background Checks
- Authorize the lender to check your credit history.
- Be ready for background checks as well.
- Submit the Application
- Hand in all forms with required fees and documents.
- Confirm receipt with the lender for peace of mind.
Pre-qualification Steps
- Initial Review
- Lenders will review your application and documents.
- They may ask for more information if needed.
- Pre-Qualification Confirmation
- Receive confirmation if you meet initial criteria.
- This allows you to start looking at properties confidently.
Following these steps can ease the process of getting a construction loan in Atlanta, Georgia!
Loan approval and disbursement process
The loan approval and disbursement process may seem complex, but we can break it down. Here’s a simple guide:
- Pre-qualification: Start by getting pre-qualified. This helps us know how much we can borrow.
- Application: Fill out the loan application form with our details. Include income, employment history, and credit score.
- Submit Documents: Provide necessary documents like tax returns, pay stubs, and bank statements.
- Appraisal: Pay for an appraisal to determine the property value.
- Loan Approval: The lender reviews our application and documents. They decide if we are approved based on credit risk and other factors.
- Sign Loan Agreement: Once approved, sign the legal papers—note there is a legal document fee of $1,850.
- Initial Disbursement: We get the first part of our funds to start construction.
- Draw Requests: As building progresses, request additional funds in stages (draws). Each draw incurs an inspection fee of $250.
- Interest-Only Payments: During construction, make interest-only payments on money borrowed so far.
Next up... let's explore the top construction loan providers in Atlanta!
Top Construction Loan Providers in Atlanta
Need a construction loan in Atlanta? We've found some top providers to help you build your dream home...
Georgia’s Own Credit Union
Georgia’s Own Credit Union offers single-close construction loans. These loans provide interest-only payments during construction....
We make it easy to build your dream home in Atlanta, GA.
Once the home is built, the loan converts to permanent financing. You can choose fixed rates for 15, 20, or 30 years. This means you only need one closing—saving time and money.
Ameris Bank
Ameris Bank offers construction loans with a one-time closing feature. This means you don’t have to go through multiple closings, saving time and money. During the building phase, we only make interest-only payments.
Once the home is complete, the loan converts into either a fixed or adjustable-rate mortgage.
With Ameris Bank, we do need a signed construction contract before approval. They offer competitive interest rates and clear loan terms. It’s an excellent choice for real estate investors looking for flexible financing options in Atlanta.
Century Bank of Georgia
Century Bank of Georgia offers construction-to-permanent loans. We make interest-only payments during the building phase, which helps manage cash flow. Plus, they have dedicated teams to help with our construction loan management.
They use a tool called BankLabs. This tool makes it easy to handle loan draws and inspections. It's very user-friendly, helping us stay on top of our expenses and progress without stress.
Wintrust Mortgage
Wintrust Mortgage offers one-time closing construction loans. This type of loan saves time and money—we only go through the closing process once. They provide FHA, VA, and Conventional options to fit different needs.
We noticed they require a minimum FICO score of 680, which helps ensure we get favorable terms.
One attractive feature is upfront rate locking, meaning we can lock in our interest rate before construction starts. This safeguards us against rising rates during the building phase...
less stress about fluctuating costs! Wintrust also has good reviews from local customers in Atlanta, making them a solid choice for our new home financing need.
CBC Bank
CBC Bank offers great construction loans. We like the flexibility they offer in building our dream home. Their rates are competitive, especially after the house is built.
Their process includes both construction and permanent financing options. This means one loan covers everything from start to finish. Plus, with CBC Bank's experienced loan officers guiding us, we can save almost $3,000 on appraisal costs.
Now that we've covered CBC Bank...
Benefits of Opting for a Construction Loan
You get to build your dream home from scratch. Plus, it can save you money in the long run... more on that later!
Flexibility in building your dream home
Having a construction loan gives us great flexibility in building our dream home. We can choose the land and every detail of the build. The funds cover permits, labor, and materials, ensuring no hidden costs.
Another plus is how funds get disbursed in installments as work progresses. This way, we only make interest-only payments during construction and convert to a permanent mortgage later.
The beauty of a construction loan lies in its customized approach.
Potential for long-term cost savings
Managing both construction and mortgage loans can lead to major savings on origination fees. By doing this, we might avoid the costs that come with taking out two separate loans. This approach offers us a way to put more money toward our new home’s actual build.
Choosing competitive interest rates also saves us money over time. These lower rates reduce monthly payments, which adds up to big savings in the long run. Plus, no prepayment penalties mean we can pay off our loan faster without extra charges...
That's a win-win for anyone looking to save!
Challenges and Considerations
Interest rates and fees can vary a lot. You need to understand loan terms before making decisions…it’s crucial.
Understanding interest rates and fees
Interest rates on construction loans depend on several factors. These include the type of loan, your credit score, and your liquidity. Points range from 1% to 4%. We need to know this because it affects how much we will pay back.
Fees add up quickly. There's a legal document fee of $1,850. Inspections cost $250 each time. We also have market rate appraisal fees to consider... Stay sharp about these costs as we move forward into loan terms and conditions!
Navigating loan terms and conditions
Understanding the terms and conditions of a construction loan can seem tough. We need to know things like interest rates, fees, and prepayment penalties. Construction loans are usually short-term, lasting between 6 to 24 months.
Some loans may shift to a 30-year fixed loan once the home is built. This structure gives us flexibility but watch for any unexpected costs that might pop up.
Comparing lenders in Atlanta is key—each one has different criteria and processes. Traditional banks often have stricter rules and slower approvals than other options. It’s crucial to read all agreements carefully… hidden fees can add up fast! Many non-bank lenders may offer more lenient terms and quicker approvals, making them attractive choices for new construction financing in Atlanta.
Local Market Insights
Atlanta's real estate market is busy right now. Prices and demand are up, making it a seller's market....
Current real estate trends in Atlanta
Median sale price for a home in Atlanta hit $434,000 as of June 2024. Homes tend to get around two offers and usually sell within about 44 days.
We noticed that the sale-to-list price ratio is at 98.0%, which means homes are selling close to their asking prices. About 20.6% of homes sold above the list price in June 2024. However, many sellers are dropping their prices, with 33.0% seeing price cuts.
Also, around 21% of homebuyers are looking to move out of Atlanta.
Housing supply remains tight while demand stays strong... It’s crucial to be strategic when investing in this market!
Impact of economic factors on construction financing
The real estate market in Atlanta is booming due to population growth and demand for housing. This impacts construction financing, making it a bit tricky. Economic factors like demand instability and the cyclical nature of the economy play major roles.
Big employers such as Coca-Cola, Home Depot, and Delta Airlines drive job creation. They boost local economic stability but also can lead to fluctuating housing prices. We must stay aware of these shifts when planning our new homes.
FAQ Section
Do you have questions about financing your new home? We’ve got answers to common queries... read on for details!
Common questions about financing new construction
Financing a new construction home comes with many questions. Let us clear up some common inquiries.
- What is included in the standard cost of the home?
- The base price usually covers the house structure.
- It might not include landscaping or upgrades.
- What financing options are available?
- Construction loans and new build mortgages are common choices.
- Each option has different terms and down payment requirements.
- When is the last opportunity for making changes to avoid delays and additional costs?
- Finalize all changes before the loan approval stage.
- Late changes can lead to higher costs and slower progress.
- What are the minimum credit score requirements for construction loans?
- Lenders typically require a credit score between 580 and 680.
- A higher credit score might get you better terms.
- How does the pre-qualification process work?
- Submit personal financial information to your lender.
- They’ll review your income, debts, and credit score.
- What happens during loan disbursement?
- Funds are released in stages as construction milestones are met.
- Your contractor will receive payments directly from the lender.
- Are there special programs or incentives in Atlanta?
- Some local lenders offer special rates or perks for first-time builders.
- How do interest rates affect my loan?
– Interest rates can vary by lender and current economic conditions.
– Lower rates mean lower monthly payments over time. - Can I refinance my construction loan later?
– Yes, you can refinance into a conventional mortgage once your home is complete. - Do construction loans cover extra costs like permits and fees?
– Typically, yes; these costs should be part of your budget upfront.
Moving on to other key points...
Conclusion
Financing a new construction home in Atlanta is an exciting journey. With the right loan, you can build your dream house just how you want it. Research lenders and understand their terms to get the best deal.
The right financing will make your building process smooth and enjoyable. Happy home building!
References
- https://www.biglawinvestor.com/marketplace/construction-loans/georgia/
- https://www.fdic.gov/analysis/cfr/working-papers/2021/cfr-wp2021-07.pdf
- https://www.hardmoneyhome.com/new-construction-loans/atlanta-ga
- https://capitalfund1.com/georgia-new-construction-loans/
- https://www.rd.usda.gov/files/ga_sfhDirect_ConstructionLoanInformation.pdf
- https://www.georgiasown.org/mortgages/construction-loan/
- https://www.georgiasown.org/
- https://www.amerisbank.com/Personal/Mortgage/Loan/Construction-Financing
- https://banksouth.com/personal/building-a-home/construction-loans/
- https://www.wintrustmortgage.com/learning-center/2021/09/build-your-forever-home-with-one-loan-.html
- https://www.cbcbank.com/personal-banking/construction-loans
- https://www.nerdwallet.com/article/mortgages/construction-loans
- https://elevationbuildingco.com/atlanta-custom-home-financing
- https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2022/04/what-has-research-shown-about-alternative-home-financing-in-the-us
- https://metroatlantaceo.com/news/2023/10/financing-new-home-construction-navigating-maze-challenges/ (2023-10-12)
- https://www.redfin.com/city/30756/GA/Atlanta/housing-market
- https://www.rockethomes.com/real-estate-trends/ga/atlanta
- https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7124044/
- https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.32.1.3
- https://elevationbuildingco.com/blog/top-questions-for-atlanta-custom-home-builders (2024-06-10)
- https://assurancemortgage.com/how-to-finance-new-construction/
