Building a home is an exciting milestone, but if you are like many first-time builders, the construction loan process can feel overwhelming. Whether you are a future homeowner, a Willmar resident looking to build a new home, or someone planning your dream project, understanding how construction loans work is essential. Heritage Bank NA, located in Willmar, MN, is here to help simplify this process with expert guidance from Mortgage Loan Originator Chris Vraa.
This guide is based on insights from KWLM’s Ask the Expert segment featuring Chris Vraa and will walk you through the key steps of securing a construction loan at Heritage Bank in Willmar, MN.
What Is a Construction Loan?
Unlike a purchase loan, which helps you finance an existing home, a construction loan is designed to fund the building of a new property. It typically involves two steps:
- Construction Loan – Covers the costs of construction during the building process.
- Permanent Loan – Converts your short-term construction loan into a traditional mortgage once construction is complete.
These loans differ in requirements and structure, so understanding the process is critical to avoiding surprises.
Steps to Obtain a Construction Loan in Willmar, MN
One of Chris’s most important lessons is the value of starting the construction loan process early. Before you apply for a loan, here are some essential steps to take:
House Plans – Work with a builder or designer to finalize blueprints for your new home.
Detailed Costs of Building – Collaborate with your contractor to determine realistic construction costs.
Talk to Us – Reach out to mortgage experts like Chris Vraa to discuss your financial options and loan eligibility.
By beginning early and nailing down these details, you will set the foundation (literally and figuratively) for a smoother building experience.
Construction Loan VS Purchase Loans
If you have secured a mortgage before, you’ll notice some key differences between construction loans and purchase loans. Here’s a closer look:
- Two Loan Phases – Unlike a one-time home purchase loan, construction loans require both a construction and a permanent loan.
- Appraisals – Construction loan appraisals in Willmar, MN, evaluate the anticipated value of your home once it’s completed, helping determine your loan amount.
- Flexibility in Funds – Funds are disbursed in phases rather than lump sum as construction progresses with a construction loan.
Understanding these distinctions can help you better manage timelines and expectations.
Prepare for Cost Overruns
A critical part of construction loan planning involves budgeting for cost overruns. Industry experts recommend setting aside at least 20% of your budget for unexpected expenses, such as material price increases or design changes.
Chris advises builders to approach this financial buffer as insurance for peace of mind. This step ensures that their projects stay on track without unexpected financial strain.
Using Equity for Down Payments
Did you know you can use equity in your land or other properties as a down payment for your construction loan?
Having a fully owned plot of land not only strengthens your loan application but can also reduce the amount of out-of-pocket money you will need for your down payment. For example:
- If you already own a lot valued at $50,000, its value can count directly toward your required equity or down payment.
- This advantage can streamline the financing process and lower costs when starting the construction process.
Inspections and Final Loan Closings
Most construction loans involve multiple inspections to ensure the proper use of funds and that the project is progressing on schedule. Key milestones include:
- Phase Inspections – Conducted at various stages of construction to unlock the next tranche of funds.
- Final Inspection – Ensures your home is complete and meets specifications and safety standards.
- Appraisal – Determines the final value of your home, which is critical for closing the permanent loan.
Completing inspections and the closing process with a trusted lender, like Heritage Bank NA, guarantees the application process and details are managed smoothly so you can focus on moving into your dream home.
Why Work with Heritage Bank NA?
Heritage Bank NA specializes in construction loans specifically for the Willmar, MN, area. Here is what sets Heritage Bank apart:
- A deep understanding of the Willmar community and its housing market.
- Access to flexible financing options and resources designed for builders.
- Clear communication at every step of the loan process.
No matter where you are in your construction planning, Chris and the Heritage Bank team are here to help you realize your vision.
Start Building Your Dream Home Today
Construction loans do not have to be daunting. With careful planning, a clear understanding of the process, and personalized support from experts like Chris Vraa, you can confidently take the first steps toward building your dream home in Willmar, MN.
For professional advice and tailored assistance with your construction loan options, contact Chris Vraa at Heritage Bank NA today. Together, we can help make your dream home a reality.
Chris Vraa
Chris Vraa has been a mortgage industry professional since 1994 and is known for her drive, dedication, and expertise.
Communication is key for Chris when it comes to her customers. When working with Chris, borrowers will know exactly what’s going on from beginning to the end. Chris knows the ins and outs of the industry from her extensive years of experience, which gives her insight that other loan officers may not have.
“MY PASSION IS HELPING PEOPLE MAKE THEIR SITUATION BETTER, NO MATTER THE CIRCUMSTANCES.” – CHRIS VRAA
Chris loves working with everyone, from the first-time home buyer because it’s all new to them and they’re so excited, to the Physician that might be buying a vacation home. Chris will consistently be there and help her customers navigate the waters. Chris is a trusted leader in the field, and she enjoys working with people to grow and thrive throughout their life.
