4 Best Construction Loans in Alabama


Construction loans in Alabama are available in a wide array of options depending on the bank you select and your personal finances.

Nearly one in four Alabama households are considered cost-burdened, meaning they spend more than 30% of their income on housing costs, according to the American Community Survey. And it’s not just low-income families who are struggling; nearly half of the state’s middle-income households are also cost-burdened. From Birmingham to Montgomery and everywhere else in Alabama, there’s a huge demand from homebuyers.

There are several reasons for this crisis. One is that wages have not kept up with the cost of housing. Over the past two decades, wages have declined when adjusted for inflation. At the same time, rental prices have been increasing rapidly; according to Apartment List data, rents in Alabama increased by an average of 33% between 2000 and 2020.

It’s no secret that the cost of home ownership keeps increasing while affordable housing availability decreases. So what’s the solution? One option is to take out a construction loan and build your own home. This can be more cost-effective than renting, especially if you plan to stay in your home for a long time. Unlike home loans, construction loans help you make the changes you want to your property so that you purchase an existing property to turn it into your dream home.

Construction loans can be a great way to get your project off the ground, but it’s essential to make sure you choose the right lender and work with a loan officer who has experience with construction projects. With the demand for real estate and problems with new home accessibility higher than ever before, it‘s a good idea to look into construction loans as an alternative to a traditional mortgage loan.

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Reasons to consider construction loans in Alabama

New construction loan terms are more flexible than you might think. With this type of loan, you can find lenders that have flexibility on repayment terms, interest–only payments during construction and other benefits. This can be an excellent option for people who want to keep their monthly payments low while they are building their homes.

Another benefit of construction loans is that you often won’t have to pay mortgage insurance premiums. Unlike a traditional mortgage, a construction loan does not require mortgage insurance, saving you hundreds of dollars each month. 

A downside to construction loans is that they often require the borrower to make monthly payments during the construction phase, even if no progress is being made on the house. This can be difficult for some people, especially if they are already tight on cash flow. You will also need to cover the costs of your existing housing while you are building the new home. Home construction loans do come with their own application process, so you’ll need to review what all mortgage lenders offer these loans and what’s required to get approved. This can include background research on maximum loan amounts, credit score requirements, and loan options.

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4 Best Alabama construction loans

1. Citizens Bank & Trust

Citizens Bank & Trust is a small bank in northern Alabama with plenty of experience processing construction loans, and therefore make a good choice if you are looking for a local lender with a lot of experience.

We contacted Citizens Bank & Trust to get details on their construction loan and this is what they told us about the program:

  • Offers loans for home construction or land/lot purchases
  • Available for primary residence or secondary home construction
  • Draw system: funds can be disbursed in stages as construction progresses
  • May roll into permanent loan, saving on closing costs
  • Local decision-making and processing

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

2. Wintrust Mortgage

Wintrust Mortgage is one of the top 20 bank-owned retail mortgage originators in the country that originates in excess of $4 billion in loans annually in all 50 states. 

Recently we asked Wintrust Mortgage to provide us with details on their construction loan and this is what they said:

  • One-Time Closing. Only pay the closing cost once
  • Lock in your rate upfront and avoid interest rate risk
  • FHA, VA, and Conventional options
  • 0% Down up to $822,375 (VA ONLY)
  • 3.5% Down up to FHA County Limits ($356,362-822,375) 
  • 10% Down on Second homes
  • FICO 680+
  • Loans must include building no Lot/Land Loans 
  • Maximum of 10-acres per build site
  • Stick Built and Modular Homes ONLY
  • NO log homes or metal homes (barndominium)
  • Tear Down and Rebuilds do qualify
  • No self-build or owner builders. The builder must be approved. 
  • Does Not allow ADUs (Accessory Dwelling Unit – Granny Flat/Garage Conversions/Basement)
  • Now lending in all 50 States

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

3. West Alabama Bank

As the name suggests, West Alabama Bank is located in western Alabama and is a small bank with a construction loan project if you’re interested in building a home or purchasing land in Alabama.

We went look for more details about the West Alabama Bank construction loan and this is what we found:

  • Interest-only payments until construction is complete
  • Small bank with flexibility to customize terms for your project
  • Can use funds for home improvement purposes

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

4. Bank of England Mortgage Alabama

Bank of England Mortgage Alabama is located in Daphne, AL (not England as the name implies!). They are a small bank with a zero down construction loan which could be attractive to many people.

We contacted Bank of England and found some interesting things about their construction loan. Here are the highlights:

  • VA construction loans up to $2 million
  • USDA construction loans with 100% financing
  • FHA construction loans with 96.5% financing
  • Conventional construction loans with 95% financing
  • Jumbo construction loans with 75% financing
  • 1 unit Primary and 2nd Homes
  • 10% soft costs at closing available
  • Long term lock available (120-day, 180-day, 270-day, 360-day)
  • Permanent loan finance (FHA, VA, USDA, Conforming Conventional, High-balance Conventional)
  • Build on own lot/land
  • Build on builder’s lot
  • Purchase an existing lot combines with construction loan
  • Roll in ALL closing costs for construction

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

Is an Alabama construction loan a good idea?

The process of getting a construction loan starts with finding the right lender and loan officer. Many lenders offer construction loans, but not all come with equal terms. Some lenders may be better for people who already have a lot of equity in their home, while others may be better for people who are just starting.

Once you find the right lender and loan officer, you will need to provide them with some documentation. These include things like your credit history, your income history, and your current debt-to-income ratio. The lender will also want to see a detailed construction plan. This plan should include everything from the architectural drawings to the estimated cost of materials and labor.

Getting a construction loan can be a great way to finance your next home improvement project. You can avoid using your money and paying interest on the funds by taking out a loan. And, thanks to the many benefits of construction loans, you can rest assured that you’re getting a great deal.

If you’re looking to explore construction loans in other states, check out our national guide to construction loans and get started exploring all 50 states.

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Joshua Holt

Joshua Holt is a licensed mortgage loan originator (NMLS #2306824) and founder of Biglaw Investor. His mortgage expertise lies in the areas of professional mortgage loans, particularly for lawyers, doctors and other high-income professionals. Prior to Biglaw Investor, Josh practiced private equity mergers & acquisition law for one of the largest law firms in the country.

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