The Peoples State Bank Residential Construction Loan Program

How does a residential construction loan work?

Our residential construction loans are made to qualified borrowers as temporary construction loans followed by a permanent residential mortgage loan once construction is complete. The maximum loan to value ratio is 80% of the appraised value, as determined by an independent fee appraiser chosen by The Peoples State bank OR the total of acquisition cost. The appraised value represents a combined value of the building land plus the dwelling. Existing equity in the land can be used to meet the bank’s 20% equity requirement.

What is the approval process for the builder/general contractor?

The Peoples State Bank does not have a formal builder approval process. However, the bank does reserve the right to request documentation from the builder regarding qualifications and experience. The Peoples State Bank does not accept borrower self-build projects. At the time of the borrower’s application we collect all of the supporting documentation necessary for loan approval; income, credit, and all financial information along with a copy of the builder’s contract including plans and specifications. The Peoples State Bank reviews and approves all loan requests, including construction loans, locally and in-house.

What is needed from the builder at the time of application?

• Detailed and accurate building plans
• Specification List
• Builder’s cost breakdown
• Executed building contract

Construction Loan Terms:

• The maximum term of the construction loan is 9 months, but with the option to extend if necessary.
• Monthly interest only payments only on the amount withdrawn from the construction loan line of credit.
• 80% maximum loan to value; based off of appraisal or total acquisition cost, whichever is lower

Frequently Asked Questions

Q: What do interest payments start for the customers?
A: During construction, interest is billed monthly based off of funds disbursed from the loan. A detailed billing is prepared 10 days before the end of each month.

Q: How does the builder get paid?
A: We disburse money on a draw basis based on the contract with the builder/general contractor with a maximum of 9 draws. The borrower will submit requests to The Peoples State Bank for draws along with an executed sworn statement. The borrower then will disburse funds to the builder.

Q: Are inspections required?
A: Yes, The Peoples State Bank will require periodic inspections during the home construction to insure the home is being built according to plans and to monitor progress according to draw requests.

Q: What is the permanent financing process?
A: Once the home is within 45 days of completion, The Peoples State Bank will need updated documentation to finalize the approval for the permanent mortgage. At this time the bank will require a new “as is” appraisal of the home. Again, the approval process is local and in-house.

Apply for a construction loan today by selecting this link or the button below.