Construction Loans In Montana: How Do They Work?

Are you thinking about building your dream home in Montana? If you have cash on hand to cover the cost of construction, then you’re already in a great spot—you can simply break ground and start building. But if you don’t have funding ready and need financing for your project, you will need to explore a construction loan.

In this short article, we’ll explain what construction loans are, how construction loans in Montana work, what you can use them for, and what you will need to apply. When you are ready to apply for your construction loan and start building, you can begin the process here. As always, your team at Bank of Bozeman is here to answer your questions and guide you through each step of the lending process.

How do construction loans work?

Basically, a construction loan covers the cost of building a new home. Once you are approved for this type of loan, you will have a draw schedule that aligns with key stages of the project. This may include pouring the foundation, framing the walls, or installing the plumbing and electrical system. At these key milestones, you will be able to access the necessary funds to pay your general contractor and keep the project moving ahead. In most cases, you will only be required to make interest payments on your construction loan during the process, rather than making interest and principal payments as you would on a traditional mortgage.

When compared to a traditional mortgage, construction loans are often riskier for the lender. After all, if you don’t make payments on a traditional mortgage, the home serves as collateral. That’s not the case with a construction loan. For this reason, Montana construction loan rates will be higher than rates on a traditional mortgage. Because of this, many borrowers convert their construction loan to a traditional mortgage as soon as the home is completed and passes inspection to take advantage of lower rates.

What can you use construction loans for?

A construction loan can be used for every part of the building process:

  • Purchasing undeveloped land
  • Working with an architect on your custom home
  • Purchasing construction material
  • Paying your general contractor
  • The cost of permitting

How to apply for a construction loan?

To apply for construction loans in Montana, you’ll first need to gather all of the documents required for other types of lending, such as a completed application, your most recent W-2 forms, a credit check authorization, and recent bank statements. You will also need items that are specific to the build, such as a material list, a cost breakdown, your architectural plans, the deed to the land the home will be built on, and any permitting that is required.

Your Local Source for Construction Loans

At Bank of Bozeman, our job is to help guide you through the process of applying for your construction loan. This means that we are here to help you gather the required material, work with your general contractor, and provide prompt service at each step of the process. Since Bozeman has one of the hottest building markets in the country, you will have confidence in knowing that you are receiving the personalized service of a local bank loan with a Bozeman lender, and a construction loan Montana residents and locals trust. After all, we have been helping people build their dream homes in Montana for nearly 20 years.

If you are ready to apply for a construction loan or just have questions about the process, we invite you to connect with our team. Bank of Bozeman is proud of our reputation as the best bank for construction loans, and we work hard to support our clients in their homebuilding dreams. Whether you are planning for your first home or a home-away-from-home, we are here to help you bring your building project to life.