Step 1: Complete an application.
During the application process, you will work with one of our highly experienced Construction Lenders to discuss your loan options. They will guide you through the process from start to finish. To begin an application, please click here.
Step 2: Get approval and process your loan.
Once your credit is approved, we will begin processing your construction loan. This step involves the following:
- Builder/Contractor Review: The builder/contractor is one of the most important components of the homebuilding process. We will review the builder you have selected and the contract you have established with them. This review is not to be considered American Bank’s endorsement of the builder’s qualifications or ability to perform under the contract you have signed. It is completed for the benefit of American Bank for further consideration of the loan.
- Appraisal: An appraisal will be performed by a bank-approved licensed real estate appraiser. They will review your plans, specifications, and property, and determine the estimated value your home will have when it is completed.
- Draw Schedule: Loan disbursements will be made as work is completed during the construction process. Draws will be based on a schedule agreed to by you, your builder and us. The builder will be asked to sign our standard Draw Request Form each time a disbursement is requested. As the borrower, you will be asked to sign this form as well, giving American Bank authorization to draw funds from your construction loan account.
- Title Review: We will work with the closing agent you have selected to ensure there is a clear title to your property. This is required for your loan to close.
Step 3: Close the loan and build your home.
The closing of your construction loan will take place at the title company you have selected. Our attorney will prepare the necessary closing documents that you will sign at the title company. In addition, American Bank and the title company will prepare your Closing Disclosure. This document will detail the loan terms, the fees associated with closing your loan and the amount of funds you will need at closing. Generally, the closing process will take between 45 minutes and one hour.
The building and disbursement stage coincides with the construction of your home. Loan funds are disbursed based on the terms of the construction loan agreement and draw schedule. Prior to each disbursement, American Bank will conduct an inspection to determine that the work for which funds are being requested has been completed. Prior to the inspection, our draw request form will need to be signed by both you and the builder. Funds will be released for payment (as indicated on the draw request) only after inspection. Draws are typically released within 2-3 days of receipt of your draw request.
Our disbursement policy is as follows:
- Borrower funds (meaning your down payment or equity) will be used first. Construction loan proceeds will be disbursed thereafter.
- Each construction disbursement (draw) is limited to the amount that corresponds to the percentage of completion, as outlined in the disbursement schedule.
- Funds are disbursed to cover labor and materials for work or installations that have been completed.
Step 4: Secure your permanent financing.
Approximately 60 days before construction is completed, your loan will be ready for refinancing from the construction phase to the permanent phase. Your Construction Lender will help facilitate this process within our Mortgage Department.