Construction Loan FAQ

• What is a Construction Loan?

  A home construction loan provides you with financing to build your dream home.

  With terms up to 12 months, this short-term loan covers your costs, including land, contractor labor, building materials, and more, until your home receives an occupancy certificate.

  Once your home is ready to move in, you will then secure a traditional home mortgage.

• What does Interest-Only Mean?

  With an interest-only loan, you are only responsible for paying the interest on the amount you draw from the construction loan each month.

  Here’s an example.

  If you draw $15,000 in January, you pay 4.99% on $15,000

  If you draw an additional $25,000 in February, you pay 4.99% on $40,000 ($15K from January + $25K from February)

• Does it matter who your mortgage is with?

  Yes because choosing the right lender for your home loan or refinance can lead to a better transaction overall. This is especially important if you are a first time homebuyer or attempting to qualify under special circumstances.

• Why choose Listerhill for my mortgage?

  At Listerhill, our focus is on “people helping people.” When you purchase a home, we want to offer you the support you need from application to closing.

  As a nonprofit cooperative owned and operated by its members, you own an equal “share” in Listerhill and vote in elections for the Board of Directors and Supervisory Committee. That means your voice is always heard, and in turn, our actions reflect your needs and desires.

  Our mortgage rates, terms, and policies will always reflect your needs in securing the best credit union mortgage loan in Alabama.

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• Is a credit union better for mortgages?

  Securing a mortgage through a credit union is preferable for many seeking to purchase a new home or refinance. Credit unions often offer more competitive mortgage rates in Alabama and are more flexible with their terms and conditions.

• How do construction loans work?

  Construction loans provide short-term financing to build a new home or make major renovations. They work differently from traditional mortgages because they’re paid out in tranches at the end of each construction phase, not as a lump sum. You usually make interest-only payments during construction, based on the amount drawn. Once construction is complete, you refinance the outstanding loan amount into a traditional mortgage (or your loan converts automatically — known as construction to permanent loans).

• Is it harder to get a construction loan?

  Construction loans require more documentation and oversight than a standard mortgage, and may have more stringent credit requirements, because lenders consider financing construction to be a greater risk than extending loans for purchasing an existing home.

• Do you need 20% down for a construction loan?

  Yes, you will usually need 20% down for a conventional construction loan from most lenders, although it is possible to pay less for building loans financed by the FHA, USDA, or VA.

• How is Listerhill Credit Union able to offer low rates for construction loans?

  Listerhill Credit Union is able to offer some of the lowest construction loan rates in Alabama, Georgia, Mississippi, Florida and Tennessee because it is a member-owned financial cooperative, not a commercial bank. That means more of our earnings go back to our members in the form of lower loan rates, rather than being used to pay dividends to corporate shareholders.

• Do I need to be a Listerhill member to apply for a construction loan?

  Yes, you do need to be an existing member of Listerhill Credit Union to qualify for a loan. Becoming a member is easy, and once you join, you are a member for life, even if you retire, move away, or change employers.

  To qualify for membership with Listerhill, you must meet one of the following requirements:

  • You live in the states of Alabama, Georgia, Mississippi, Florida, or Tennessee, you are eligible to become a member.
    • Depending on your eligibility, we may require membership in an approved association at no cost to you.
  • You are a family member of a current or potential Listerhill member.