As the population of Alaska continues to grow, people are looking for more convenient ways to get their homes built. That’s why more and more Alaskans are turning to construction loans rather than getting traditional mortgages.
The population of Alaska has increased by 5% in 2022. This means that there are now more Alaskans than ever before. And as the population grows, so does its need for housing, according to the Alaska Realtors Association. With Alaska’s rugged landscape, many people choose construction loans when they want to build new homes or renovate their old ones. No matter where you’re in Juneau, Anchorage, Ketchikan, or anywhere in between, finding real estate might take you down the path of getting a construction loan and then hiring a general contractor to turn your property into your dream home.
When compared with mortgage loans, construction loans are also becoming increasingly popular because they allow homeowners to buy land with cash or credit instead of taking out loans from banks or other financial institutions like traditional mortgages do. The approved loan amount means quick ability to start on construction projects for single family or multi-family properties.
Residential construction loans make it much easier for borrowers who aren’t financially well off yet but still want an affordable place where they can live comfortably with their families without worrying about paying off debt later on down the road when bills start piling up.
A single close construction loan can help you obtain and close permanent financing and the construction loan of your new home together at the same time. This one-time close saves time and streamlines the entire process. If you’re active duty or a U.S. veteran, you might be able to work with the Department of Veterans Affairs government agency to help with your residential construction loan, too.
There are a number of other great benefits to getting an Alaska construction loan as well. Let’s briefly go over some of these benefits and some of the things you should consider when applying for a new construction loan in Alaska. Unlike home loans, a construction loan program allows you to have more flexibility in purchasing a product and making the necessary renovations built into the loan directly.
Benefits of a new construction loan in Alaska
Many people think that getting a new construction loan is just for people who are building a new home. However, the truth is that you can use a new construction loan to buy any property that is currently under construction, including land, a house or apartment that’s still being built, and even a commercial building!
While it might seem like a lot of money upfront, there are several benefits to getting a new construction loan. Here are some of them:
- The interest rate will be lower than if you got an existing loan for the same amount of money. This makes sense because you’re not paying for the property yet; you’re just borrowing money to build it.
- You can use the money as soon as it’s approved by your lender instead of waiting for months or years before your home is ready for occupancy.
- You can use every dollar of your down payment right away and avoid paying interest on those funds until after closing (which means no interest payments until after closing).
- You’ll have cash flow while the home is being built, so you can pay contractors without worrying about how long it will take until they finish their work.
4 Best construction loans available in Alaska
1. First Bank of Alaska
First Bank of Alaska is a local bank serving Southeast Alaska since 1924. The financial products offered by First Bank are generally portfolio, meaning the bank lends on its own balance sheet into the community and therefore has more flexibility on terms.
Recently we asked First Bank of Alaska to provide us with details on their construction loan and this is what they said:
- Build, renovate, or upgrade your home
- Available for primary residence or second home construction
- Short-term loan option
- Smooth transition to long-term mortgage
- Consolidated closing saves you money
- Lock in a low mortgage rate before house is completed
- No application fee
- Local underwriting and processing
If you’re interested in connecting directly with a loan officer at First Bank of Alaska that specializes in construction loans, we can put you in touch with them directly.
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
If you’re interested in connecting directly with a loan officer at Wintrust Mortgage that specializes in construction loans, we can put you in touch with them directly.
3. First National Bank
First National Bank Alaska is a large lender in the state with a comprehensive construction loan. They offer a two-closing construction loan where you first use an interim construction loan to fund the cost of building and where you later take out a long-term mortgage to pay off the construction loan.
Recently we asked First National Bank to provide us with details on their construction loan and this is what they said:
- Construction loans are generally made for a 12-month term with interest paid monthly.
- Monthly interest payment is based on the amount of money disbursed.
- The bank requires a minimum of 25% of the total project cost in cash, land equity, and/or project costs paid out of pocket.
- The total project cost includes the land value, the construction budget, a 10% contingency for cost overruns, and estimated fees and interest.
Once you pre-qualify for long-term financing, the following documentation is needed for review:
- Financial statement form
- Estimate of construction cost budget
- Supplier/Subcontractor list
- Plot plan/Survey
- Water/Sewage design (if applicable)
- Heat loss analysis (Energy Rating)
- Engineers Report
- Construction Time Schedule
- Copy of building permit (if applicable)
- Contractors license (if applicable)
- Completed Description of Materials form
If your long-term financing will be either an FHA or VA loan, they will need further documentation to obtain the appraisal:
- Completed Builders Certification form
- Three copies of your plans, specs, plot plan, and heat loss calculations
If you’re interested in connecting directly with a loan officer at First National Bank that specializes in construction loans, we can put you in touch with them directly.
4. Matanuska Valley Federal Credit Union
If you’re looking for a credit union to finance a construction loan, Matanuska Valley Federal Credit Union was chartered in 1948 by its 20 original members and has a long history serving the local community and can handle construction loans.
We reached out to Matanuska Valley Federal Credit Union to learn more about their construction loan. Here are the highlights:
- Provides construction loans and land/lot loans
- Available to owner-builders
- Property must be accessible by road
- Raw land loans only, although may include well, septic or utility improvements.
If you’re interested in connecting directly with a loan officer at Matanuska Valley Federal Credit Union that specializes in construction loans, we can put you in touch with them directly.
Does an Alaska construction loan make sense for you?
If you’re planning to build, renovate or improve your home, it may be time to consider a construction loan. A construction loan can help you pay for the costs associated with building or renovating your home. These loans are typically short-term and offer competitive rates, so they’re ideal for homeowners who want to finance their project over time.
If you’re not sure whether a construction loan is right for your needs, here are some questions to ask yourself:
Do you need a long-term solution? If so, then a construction loan may not be right for you. Construction loans are short-term loans that typically range from 12 months to 36 months. If you need more than 36 months of financing, then a traditional mortgage might be better suited for your needs.
Will your credit score meet the requirements of the lender? It’s important that your credit score meets the requirements set by the lender offering this type of loan before applying for one because lenders typically require that borrowers have good credit scores in order to qualify for these types of loans. That said, if you do meet the requirements, then an Alaska construction loan might just be the perfect solution for you.
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.
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.