Home Construction Loans
Mortgage & Construction Loan Financing
We offer loans with the flexibility to help you build a home. You'll first need an interim construction loan to fund the costs of building. When your home is complete, a long-term mortgage will pay off the construction loan.
First National Bank Alaska can be your one-stop shop — for both types of loans.
Q. What is a construction loan?
Construction loans are generally made for a 12-month term with interest paid monthly. The monthly interest payment is based on the amount of money disbursed. The bank requires a minimum of 25% of the total project cost in cash, land equity, and/or project costs paid out of pocket. The total project cost includes the land value, the construction budget, a 10% contingency for cost overruns, and estimated fees and interest.
Q. Do I need a general contractor?
Careful budgeting is extremely important, especially including allowances for unforeseen events. Uncontrollable events such as strikes, untimely subcontractors, delays, etc., can impede construction and be more costly than originally thought. If your costs grow considerably, there is a chance you will not be able to satisfactorily repay the debt. Also, unpaid contractors and suppliers of materials may file liens upon the project, preventing the closing of your long-term mortgage.
If there is doubt about your knowledge and ability to act as your own general contractor, a licensed and bonded general contractor will be required to oversee the project.
Q. What documentation do I need?
Once you pre-qualify for long-term financing, the following documentation is needed for review:
- Financial statement form
- Estimate of construction cost budget
- Supplier/Subcontractor list
- Plot plan/Survey
- Water/Sewage design (if applicable)
- Heat loss analysis (Energy Rating)
- Engineers Report
- Construction Time Schedule
- Copy of building permit (if applicable)
- Contractors license (if applicable)
- Completed Description of Materials form
If your long-term financing will be either an FHA or VA loan, we will need further documentation to obtain the appraisal:
- Completed Builders Certification form
- Three copies of your plans, specs, plot plan, and heat loss calculations
To comply with Alaska Housing Finance Corporation and the International Building Conference of Building Officials standards, you need to have a certified building inspector inspect your home during construction, and comply with thermal standards. For private wells and septic systems, state or municipal health department approval and soils and percolation tests are required. You will be required to provide hazard insurance with Builders Risk Coverage to include floods if property is located in a flood plain.
Q. How will I receive my loan funds?
During construction, the approved interim construction loan funds are advanced in amounts proportionate with the percentage of completion of each phase of construction.
First National conducts inspections of the building site on a monthly basis. This lets you use your loan to make payments to your suppliers and take advantage of any available discounts.
Remember to establish credit accounts with your suppliers. Funds may be disbursed directly to the subcontractors or suppliers to ensure payment is made for services rendered.
Q. Construction is complete. Now what?
Upon completion, a final As-Built survey and final building inspection must be done. The appraiser must do a final inspection to recertify its value and confirm that the improvements have been constructed in a good, competent manner per plans and specifications.
A Notice of Completion document must be recorded at this time. This will establish a 15-day lien period, during which unpaid contractors and laborers may file claims of lien. Once the lien period has expired, your long-term mortgage may be closed, thus paying off your interim construction loan.
Your expected completion date is critical. If a delay occurs, the permanent financing may become unavailable at the rate you anticipated. It is important to finalize your long-term financing 45-60 days from completion.
The bank will examine all applications thoroughly and weigh the merits of each application in accordance with our lending policies.