Conventional mortgage products help you buy or refinance homes but are largely unsuitable for renovation or construction work. Whether you’re building a new structure from the ground up or repairing your existing home, our guide will help you find the right lender.
Chase Bank is one of the most reputable mortgage lenders in the traditional borrowing industry, but they have limited options for construction financing. As of 2023, you won’t find a direct, consumer-purpose Chase construction loan product right away. Homeowners typically have to settle for light renovation or reconstruction financing or go for commercial construction loans offered by the lender.
In this article, we will explore all construction-related Chase products and suggest attractive funding alternatives for your home-building project.
Which Chase Bank Products Can Help With Construction?
Most prominent mortgage lenders don’t offer construction loans to homeowners because the likelihood of the project going south is high. These loans are typically based on the value derived from a blueprint. Unlike property developers, homeowners often don’t have the required expertise to see construction work through efficiently. A construction loan also has no readymade house to act as collateral, which increases the risk of the lender losing the money.
Chase Bank has well-designed mortgage products for buying a new home, refinancing one, or using the equity of an existing property. If you have basic construction or home improvement work, you can use the following products that help turn home equity into cash:
- Mortgage refinance with cash-out
- Home equity line of credit (HELOC)
Chase Mortgage Refinance With Cash-Out—Works for Immediate Repairs
Chase cash-out refinance helps you exchange your current mortgage for a larger one based on the equity you’ve gathered in your property. In real estate terminology, equity entails the value of the property that remains after you pay off the mortgage.
When you get a home purchase loan, your equity is represented by the down payment you make. As you repay the loan in amortized installments, your equity value increases. Add to that the market value appreciation of your property, which allows you to refinance your property for a much bigger value than the original mortgage.
Source: Monica Silvestre
Chase cash-out refinance can be used to upgrade your current home, flip a property, consolidate debt, or start construction on an entirely new project—the lender does not put too many restrictions on how you use the extra funds. Check out the core components of the product:
|Component||Chase Mortgage Refinance With Cash-Out|
|Maximum loan amount||Depends on your existing equity|
|Interest rate||Fixed rate on the entire mortgage amortized throughout the tenure of the loan(the rate is typically higher than regular refinance rates)|
|Closing costs and other fees||Chase Bank’s standard mortgage charges, including:|
• Application fee
• Appraisal fee
• Closing cost
• Title fee
|Funding access||You get a lump sum payment after closing (the residual amount after settling your current mortgage)|
Chase HELOC—Suitable for Long-Term Home Improvement Projects
Chase HELOC loans can be used to take equity out of your primary residence regardless of whether you have an existing mortgage or not. HELOCs are not paid in a lump sum. Chase allows you to draw necessary funds over ten years, and you only pay interest on the amount drawn.
For example, you have a home worth $400,000. If the equity ownership value of your current home is $100,000, you can get a HELOC worth up to 70% loan-to-value (LTV), which would be around $70,000. Use the $70,000 to add gradual upgrades to your home. You pay interest on the amount withdrawn, not on the $400,000 (which is the case with refinances).
Chase HELOCs have variable rates and annual fees, making them costlier than refinance products.
Note: At the time of writing this article, Chase has suspended further HELOC applications due to unstable market conditions. The bank states that it will resume accepting applications once the situation improves.
How To Qualify for Chase Refinance or HELOC Loans
Chase does not disclose the eligibility criteria for its equity-based mortgage products online, but you need to have:
- A minimum credit score of 680–740
- Debt-to-income (DTI) ratio lower than 40%
- Home equity of more than 20%
Since these products are not full-fledged construction loans, they generally don’t work for building a customized home from scratch.
Chase also offers commercial construction loans via its Community Development Banking services, managed by its parent company JPMorgan Chase. The commercial programs are targeted to serve regional and local real estate developers and seasoned property rehabilitators. Details about the commercial construction loans at Chase are not provided on the website—you have to use a client contact form for more info.
Source: Alena Darmel
Beyond Chase Bank—Construction Loan Options Available
If you’re looking for new home construction loans, your options are limited. Many popular lenders like SoFi, Navy Federal, and loanDepot do not offer construction financing. We have compiled a list of the top lenders you can explore in the traditional landscape:
|Construction Lender||Minimum Credit Score||Availability||Average Closing Time|
|TD Bank||720||Mainly East Coast (15 states and Washington, D.C.)||30–45 days|
|U.S. Bank||620–740 (varies)||28 states||30–60 days|
|Flagstar Bank||720||All 50 states and Washington, D.C.||30–60 days|
|Truist||620||16 states (mainly southeastern)||30–60 days|
|Wells Fargo||620||39 U.S. states and territories||60–90 days|
|Magnolia Bank||620||47 states||30–60 days|
|Homebridge Financial Services||640||19 states and Washington, D.C.||30–60 days|
Besides having a spotless credit history, you should have a DTI ratio below 36% to qualify for regular construction loans. Know that the screening process is usually stringent and includes the submission of multiple documents, such as:
- Pay stubs or income proof
- Tax returns dating back at least two years
- License copy of a qualified builder
- Detailed blueprint
- Land ownership documents
- Valuation certificate by a reputable third-party appraiser
- Copies of bank statements (to prove that you have the cash reserves to manage interest payments for up to six months)
Navigating traditional lending can be cumbersome for homeowners as the underwriting process is too regulated and the chances of rejection are high. Because of these drawbacks, savvy borrowers gravitate towards hard money loans for efficient project financing.
Want an Easier Funding Route? Try Hard Money Construction Loans
A construction project thrives only when it has a timely and constant supply of funds. Getting a hard money loan is one of the best solutions if you want to complete construction work without hiccups.
Hard money loans are alternative solutions for secure financing. While they are popular among business and commercial real estate borrowers, average mortgage users often misunderstand these products. In basic terms, a hard money loan is a pure asset-based loan offered according to the value of the collateral. So, you can qualify even with an imperfect credit score or income status. Since the eligibility requirements are lenient, the verification process is quick, and you can get the funds within days.
- Flexibility—Unlike public banks, hard money lenders service a limited number of customers, so they are open to accommodating different borrowing needs. For example, you can qualify for DIY construction projects without hiring a builder
- Consistent cash flows—Bank construction loans require constant inspection and reporting, and the officers often suspend funding if you’re off schedule. Hard money lenders are more lenient as they’re directly invested in the completion of the project
- Competitive rates—Hard money lenders are state regulated and operate in a competitive market. They typically do not charge exorbitant rates, but the pricing is similar to commercial lending rates (8%–20%)
Hard Money Loan Solutions (HMLS) offers excellent construction financing options, but we recommend going through customer reviews and evaluating the service quality before committing to any hard money lender.
Get Commercial or Consumer-Purpose Construction Loans With Hard Money Loan Solutions
Hard Money Loan Solutions can help remove the frustrating financing hurdles if you have a construction project in mind. The Florida-based lender (rated 5 stars on Google service reviews) breaks bureaucratic barriers to provide no-nonsense construction funding to anyone with adequate collateral. You can acquire construction financing for:
- New construction
- Reconstruction (or resuming work on a partially constructed property)
- Property rehabbing
- Property flipping
- Land purchase
- Home renovation
Source: Google Reviews
The HMLS team has a transparent and hands-on lending process built around the borrower’s specific needs. You can get customized construction loans with collateralization and repayment terms that work for you. Other benefits include:
- Light paperwork—You have to provide documentation related to your collateral and some basic permits and construction plans. HMLS doesn’t require paperwork verifying personal finances, but you’re more likely to qualify if you have previous rehabbing or construction experience
- Funding guarantee—HMLS will never suspend or withdraw funding once you qualify for a specific amount
- Free real estate consultancy—The HMLS team comprises veteran real estate investors and businessmen driven by the idea of providing accessible growth opportunities to all. They offer a quick resolution of queries and are happy to support clients with industry-specific knowledge
- No junk fees—Unlike other lenders that usually require you to pay digital retention, underwriting, processing, appraisal, and upfront fees, HMLS won’t charge you those or any other hidden fees
HMLS Construction Loans—Terms and Funding Speed
HMLS serves authentic construction loans with interest-only payments, which keeps your monthly cash outflow low. When the finished property is ready, get a long-term mortgage (or sell the house for a profit if you’re flipping) to pay off the loan amount. The entire process is smooth with negligible cash flow issues, but we recommend keeping aside a small percentage of the loan for contingencies and unplanned expenses.
The following table lists some distinguishing components of an HMLS loan:
|Interest rate||9.99% to 12%|
|Principal||$100,000 to $50,000,000+|
|Installment type||Interest only (check out the calculator here)|
|Loan-to-value (LTV) offered||Up to 70% of the as-in property value or purchase price (whichever is lower)|
|Funding time||3–14 days|
|Origination fee||2 points or 2% of the principal sum|
|Prepayment penalty||No penalty if repaid after 6 months|
|Down payment deposit||Not required|
|Minimum credit score/DTI ratio||Not applicable|
Once you qualify for an HMLS loan, you have the autonomy to deploy the funds independently. The group follows a customer-friendly philosophy—if your construction project runs into unforeseen difficulties, talk to your lender to figure out a sensible forward strategy.
Source: Tima Miroshnichenko
Let an HMLS Lender Assist You!
HMLS packages are set up after careful talks with the applicants. A typical funding cycle passes through three stages:
- Online application—You fill out an online loan application form specifying your intent and desired sum. The HMLS team calls you on the phone to discuss your funding situation
- Property appraisal and loan tailoring—HMLS appraises your collateral and evaluates your proposed construction for risk assessment. You will receive a formal offer if your qualify (HMLS is quick to convey rejections as well, so you’re never left hanging)
- Fund disbursal—If you confirm the loan offer, HMLS starts working on the official paperwork and title deeds to release funds to you in a legally compliant manner
HMLS has a reasonable cost structure free from unnecessary or inflated charges. If you don’t understand any aspect, get in touch with a lender and let them help you.
Featured image source: Kyle Fritz