Building a Home

The Construction Loan Process

At North Shore Mortgage, we know how exciting and stressful building a home can be! We make the loan process as simple as possible so you can focus your energy on important things, like choosing the right builder.

The Construction Loan and the Permanent Loan.

Before you work with your builder to design your new home, find out how much you can borrow and what kind of home you can build. Our Financial Calculators can help.

North Shore Mortgage requires you to have a general contractor.

Need help choosing a loan? Contact one of our mortgage experts, browse our Loan Types page and use our Online Form to get pre-approved. Our construction loan application process takes approximately 10-14 days at the most, but we'll work with you if you need it more quickly. See our Construction Loan Checklist for what we'll need from you at this point.

Closing takes place at the Title Company's office. We send all your paperwork there so it's ready when you arrive. The closing company will call you in advance to let you know how much money you'll need to bring for the downpayment and closing costs. Remember to bring a certified check for that amount. The title company cannot accept personal checks.

At the closing you'll sign various documents, including HUD-1 Settlement Statement, Note and Mortgage.

The HUD-1 shows all the financial details of the transaction, including the purchase price, the loan amount, the closing costs, and the total amount to be paid by the borrower. The closing costs are itemized and the title company's closer will go through each of the costs. Check them against your closing costs estimate sheet to make sure they are accurate.

The Note is the legal document that creates the obligation to the buyer to repay the loan to the lender. It will show the loan amount, the interest rate and the amount of the monthly payments.

The Mortgage is the document that gives the lender an interest in the house as security, or collateral, for the loan.

After all the documents are signed you are ready to start construction of your new house!

Once you close on your construction loan, you have 12 months to complete your home. When the footings and foundation are in place, a plat sketch is ordered from the title company. They will supply it to us.

As construction continues, the builder should give you regular invoices to sign. You then present these invoices to the title company. After the title company approves the invoices, they submit them to us. We then pay the builder for work that has been completed. You'll receive statements indicating amount paid and amount remaining.

During construction we will ask the appraiser to inspect construction progress. You pay the cost of inspections — normally 3-5 are expected during construction.

While you build, the interest rate on your loan is at a fixed rate and you only pay interest as the funds are used. You may lock in on an interest rate for your permanent loan 60 days prior to modifying to a permanent loan.

This takes place after construction of your new house is complete, all funds from the Construction Loan are disbursed, and it's been twelve months or less since closing on the Construction Loan. The Construction Loan is then refinanced to a fixed rate Permanent Loan through a second closing.

Conventional Fixed, 15 Years
Rate 3.500% | APR 3.737%
Conventional Fixed, 20 Years
Rate 3.750% | APR 3.936%
Conventional Fixed, 30 Years
Rate 4.000% | APR 4.135%
FHA, 30 Years
Rate 3.500% | APR 4.654%
VA, 30 Years
Rate 3.625% | APR 3.750%
January 17

Duluth, MN