TD Bank Construction Loan—A Compact Handbook for Borrowers

by HMLS

TD Bank is a subsidiary of Toronto-Dominion Bank, a Canadian multinational lending company that manages around 1,200 branches in the U.S. Being one of the largest banks in the country, it offers a wide range of services for business, commercial, and home financing. If you want to build or renovate your home, a TD bank construction loan may seem like a viable option, but is it the best one?

In this guide, we will provide all the information you need about TD Bank’s construction loan products. You will learn about the types of construction loans offered, along with their features and other lending aspects. We have also included customer ratings and some popular alternatives for construction financing.

What To Expect With a TD Bank Construction Loan

Home construction loans are a part of TD Bank’s home lending packages, which include products like home purchase loans, refinancing, and equity-based cash-out. The company also offers commercial real estate loans for construction to property developers and seasoned real estate investors, but they are more suitable for extensive projects carried out as a part of the business.

We will focus on TD Bank’s construction loans designed for homeowners. The bank mainly offers construction-to-permanent or one-time-close loans, which essentially means it will hold the primary mortgage on the finished property once the construction is over. According to the TD Bank website, you can use the loan under two scenarios, explained in the table below:

ScenarioSuitability
Ground-up home
construction
You can use this option when you:
Build a home on a vacant land
Want to purchase a home, but the builder or contractor requires progressive payments in installments
RenovationRenovation-focused construction loans work for borrowers who want to rehab a property or make improvements to their current home—the latter is usually offered as a cash-out refinance deal at TD Bank, provided you have an existing mortgage

TD Bank doesn’t specify the differences between the two options, encouraging borrowers to reach out to its local loan officers for more info.

Source: Avel Chuklanov

TD Bank Construction-to-Permanent Loan—A Quick Summary

TD Bank construction-to-permanent loans are conventional mortgages. The lender doesn’t offer government-backed products, such as Federal Housing Administration (FHA) or U.S. Department of Veterans Affairs (VA) construction loans.

Regardless of the lender, conventional construction loans have stricter entry requirements when compared to long-term home loans, largely because of the lack of a structure that can be used as collateral. We have broken down the core aspects of construction financing at TD Bank below:

  1. Eligible construction
  2. Credit score and debt-to-income (DTI) ratio
  3. Down payment
  4. Interest rates
  5. Areas serviced

Keep in mind TD Bank doesn’t follow a cut-and-dry structure for applicants. Your construction package will depend on your overall credentials and the branch you choose to work with.

Eligible Construction

TD Bank typically supports construction plans for housing structures with 1–4 units. You cannot acquire a loan for building condominiums and cooperative (co-op) houses. The property must be intended to be used as a primary or a secondary (vacation) home, which implies that the construction of investment won’t qualify.

As far as expenses are concerned, you can finance anything from architect fees to flooring, but you cannot spend the loan on cosmetic expenses like home decor and furniture.

Source: RODNAE Productions

Credit Score and DTI Ratio

Your credit score and DTI ratio are evaluated to check your financial soundness and ability to meet the high interest payments required for construction loans. Check out the ideal financial figures of construction loan applicants, as desired by top lenders like TD Bank:

CredentialDetails
Credit score720 and up (tagged Excellent)
DTI ratio36% or lower
Cash reservesReserve cash to meet up to six months of interest payments

In certain situations, TD Bank may entertain applicants with slightly poorer financial health, but these considerations often translate into high interest rates or closing costs.

Down Payment

For projects up to $1,500,000, you need to put down 20% of your own savings to qualify for a TD Bank construction loan. Your down payment commitment would be 30% for larger projects worth up to $3,000,000.

TD Bank may accept the value of the land as a down payment, provided the property meets its standards. The land also plays a part in how much you can borrow. If you’ve had the land for six months or more, you can get around 80% loan-to-value (LTV)—calculated on the appraised value of the project.

In case you need to purchase the land or have bought the land recently, you can borrow up to 80% of the cost of land and construction expenses.

Interest Rates

In most cases, TD Bank offers a quote only after you’ve submitted an application. The rate depends on numerous factors, including:

You can go for 15-year or 30-year fixed rates or adjustable-rate mortgages (ARM)—your rate will be locked in before the construction begins.

Most construction borrowers pay only the interest during the construction phase. Once the construction ends and they secure the certificate of occupancy, they can switch to amortized installments. A bank officer typically inspects the progress of construction periodically to ensure the funds are used according to the budget submitted.

Areas Serviced

TD Bank primarily operates on the East Coast of the United States. These are the states where the lender currently has physical branches:

  1. Connecticut
  2. Delaware
  3. Florida
  4. Maine
  5. Maryland
  6. Massachusetts
  7. New Hampshire
  8. New Jersey
  9. New York
  10. North Carolina
  11. Pennsylvania
  12. Rhode Island
  13. South Carolina
  14. Vermont
  15. Virginia
  16. Washington, D.C.

You have to create an account to apply for a TD bank construction loan, but you can also visit a physical branch or talk to an officer near you to get started. You’ll need to present the following documents for screening:

  • Income proof
  • Schedules of asset and debt
  • A detailed (and signed) construction contract with the builder or developer
    • If you’re going for a DIY, you must provide documents to prove that you’re an experienced and insured builder with a suitable license
  • Financial statements of the builder
  • Insurance paperwork
  • Property appraisal documents
  • Credit report

If you qualify, the funds will be released to the contractor in parts according to a predetermined draw schedule.

Source: Mikhail Nilov

Pros and Cons of a TD Bank Construction Loan

A TD Bank construction loan is a fine option for financing if you have robust financial health, but it will be hard to qualify for if you fall into the low-income group. Here are some of the major pros and cons of the product:

ProsCons
Rolls into a permanent mortgage (with single-close)
Accessible online
Fixed and adjustable rates offered
Interest-only payments
No rate and closing cost transparency
Only available around the East Coast 

TD Bank Construction Loans—Customer Reviews

TD Bank has mostly mixed reviews online. It has a 3.9/5 rating on Consumer Affairs and a 1.7/5 rating on Trustpilot. Some of the common complaints specific to construction loans are slow processing, inadequate web and mobile interfaces, and difficulty getting through to customer service.

That being said, no bank is perfect, and it would make sense to at least get quotes from TD Bank if you’re shopping for construction loans. The lender is said to process loans within 30–40 days for borrowers with a spotless financial profile.

Viable Alternatives for Construction Financing

Some other traditional options for construction financing include Magnolia Bank, Navy Federal Credit Union, Chase Bank, and Nationwide Home Loans, Inc. The qualification and screening aspects with these lenders are similar to what you’d experience at TD Bank.

If you want construction loans with less-than-stellar credit status or a lighter paperwork load, you can go for hard money financing. Hard money lenders are private, non-bank companies or registered groups offering straightforward construction loans, calculated as a percentage of the as-in value or cost input of the property.

Source: Yan Krukov

These lenders are more concerned about the quality of collateral than the borrower’s financial health. You can offer land, the future value of the home, or another property as a lien to qualify. Hard money loans can be an easier arrangement for construction than conventional loans because they:

  • Are readily available—Bureaucratic screening impairs the speed of conventional loans, which can be detrimental to deadline-bound construction projects. Hard money lenders have fewer restrictions than banks, and that allows them to expedite screening and fund deals within days
  • Can be accessed by any borrower—Hard money loans are available to most borrowers who do not fall on the traditional radar, such as people with poor credit or a history of financial delinquency
  • Require interest-only payments—Hard money products are short-term, and you only pay the interest throughout the tenure of the loan without committing to a long-term loan. Once the structure is ready, you can settle the debt by:

Hard money lenders typically charge 1–5 points higher rates than traditional lenders, but the state you are building in also impacts the serviceable rates.

Construction Financing Made Easy With a Hard Money Loan Solutions Loan!

If you’re looking for new construction, rehab, or renovation loans, let Hard Money Loan Solutions (HMLS) assist you. HMLS is a Florida-based private lending company with years of experience in establishing a direct route between borrowers and capital in the real estate scene. The team has built a niche in hard money-enabled construction financing by:

  • Providing expert consultancy for construction projects
  • Approving and processing loans in a time-sensitive manner

Construction loans at HMLS can be tailored to meet your specific needs. Depending on what your end goal is, you can also go for products like:

The HMLS group is all about brainstorming for innovative solutions regardless of your situation. The team can service borrowers with poor credit scores, high DTI ratios, or even a non-U.S. nationality status. The group maintains a 5-star service rating on Google and has several testimonials from satisfied customers.

Source: Google Reviews

You can qualify for an HMLS construction loan with minimal paperwork—the lenders like to see a viable construction plan justified by a reasonable budget, but you don’t have to bother with chores like gathering bank documents and financial statements. In case you are not sure how to proceed with the construction, request a free consultancy at HMLS and get one-on-one guidance from a veteran lender.

Terms of an HMLS Construction Loan

HMLS construction loans can be based on the current or future value of the property. Every deal is handled on a case-by-case basis so that the borrower gets the most generous terms. The team services consumer-purpose, business, and commercial construction loans of various magnitudes—here are the parameters of a loan package you can apply for:

Loan ComponentHMLS Parameters
Principal$100,000 to $50,000,000+
Eligible construction Single- or multi-unit home
Condo
Apartment
Townhouse
Business or retail unit
Commercial structure
Special-purpose structure
Interest rate9.99%–12%
Interest typeFixed
Term1–3 years
Installment typeInterest only (no amortization)
LTV offeredUp to 70% of the lower of:
As-in value
Purchase price or cost input (as applicable)
Closing3–14 days
Down paymentNot required
Origination fee2 points or 2%
Prepayment penaltyNo (if repaid after six months)

HMLS typically doesn’t conduct inspections if there is no need for draws. The entire loan is released after approval and processing, so you are free to budget and plan as you please. Still, we recommend keeping at least 10% of your loan amount as reserve funds for contingencies.

Source: RODNAE Productions

Application Procedure at HMLS

Traditional lenders may make you wait, but HMLS values your time. The group has established an efficient lending structure consisting of an online application process and hands-on screening directly by the lender. Here is what the procedure entails:

  1. You fill out the HMLS application form online
  2. A lender reviews your application and calls you
  3. You provide details about your construction plan and answer questions the lender may ask
  4. The lender conducts property appraisal if required
  5. The HMLS team designs a package that compliments your needs

The HMLS group doesn’t back out from financing a deal once they communicate the approval, so you can rest assured your project won’t face funding delays.

If you have trouble securing a permanent mortgage or reselling the property down the line, don’t panic. The team operates on ethical and lenient principles—let your HMLS lender know about your situation and discuss an alternative repayment strategy with them.

Featured image source: Mikael Blomkvist

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