Delaware is a small state on the eastern coast of the United States known as The First State due its rich United States history. There are only two counties in the state, New Castle and Kent. Delaware has a population of about a million residents, which has been following a historical trend of decreasing slightly each year.
With so little land, housing prices have been rising in Delaware. The median home price is $320,000, according to Delaware Online. In 2022, home prices are expected to rise by 3%, with the population decreasing by 2%. With the demand for real estate and housing prices on the rise, first-time and experienced homebuyers and even real estate investors alike are investigating all their options beyond home equity loans and mortgage loans.
Many people in Delaware are turning to home construction loans rather than getting traditional mortgages because these loans can be used for building an addition to your home or building a new house from scratch. Construction loans allow you to borrow funds upfront so that you can begin building your dream home before it’s complete. The funds will then be paid back over time as construction progresses. Now might be the perfect time to review loan rates and credit score requirements for a home construction loan if you want to build your dream home. Or, if you want a one-time close construction loan, you can close on both your permanent financing and construction loan at the same time.
Construction loans are ideal if you’re looking for a way to finance your new home while still living in your current place while it’s being built. Construction loans are short-term loans unlike a traditional mortgage. Construction loans also allow homeowners who don’t have enough cash on hand or collateral for a traditional mortgage loan to still own their own home without having to sell their current one first.
Benefits of a new construction loan in Delaware
There are many benefits to getting a new construction loan, but the first and foremost is that you can get the home you want down to your specific requirements. You’ll have more control over the design, layout, and materials used in your home, which means you can make sure everything is exactly how you want it before moving in.
Another benefit is that you’ll be able to take advantage of all the tax deductions related to your home purchase. If you’re planning on living in your home for at least one year after its completion date, there are many tax deductions available (including interest paid on your mortgage). It’s important to keep track of these expenses so they can be deducted from your taxes at the end of each year.
Construction loans can also be interest-only during the construction period, which allows you to avoid having to pay two mortgage payments while your new house is being built. You’ll want to work with a loan officer that has experience with construction projects to make sure you’re taking full advantage of any benefits offered by construction loans. Discuss the loan amount and loan rates directly with your mortgage lender to see if this is a better route for you to pursue with real estate.
5 Best Delaware construction loan lenders
1. Fulton Mortgage Company
Fulton Mortgage Company specializes in mortgages and has extensive experience in construction loans specifically, although their upper loan limits may not work for some people in New Jersey looking to build houses.
We are in touch with several loan officers at Fulton Bank who specialize in construction loans and here are the details they provided on their construction loan product:
- 10% Down Required (Owned Lot may be counted towards requirement)
- Lot and Construction at the same time
- One time close with rate modification at the end
- Up to $1,500,000 at 80% Loan To Value
- Up to $850,000 at 95% Loan To Value
- Interest-only during construction
- 3/1, 5/1, 7/1, 10/1, and 15/1 ARMs
- 80/10/10 is also available
- Not Eligible for VA and FHA programs
If you’re interested in connecting directly with a loan officer at Fulton Bank that specializes in construction loans, we can put you in touch with them directly.
2. Tidemark Federal Credit Union
If you’re looking to work with a credit union, Tidemark Federal Credit Union is a local Delaware and Maryland lender that offers construction loans for primary residences.
We contacted Tidemark Federal Credit Union to learn more about their construction loan program and here are the highlights:
- Construction-to-permanent loan option features one closing
- Primary residences
- During construction, get financing for up to nine months and up to 100% of your property’s value at a fixed rate with interest-only payments
- Construction loan converts to an Adjustable-Rate Mortgage once your home is complete, saving you thousands of dollars in additional settlement costs
- For land loans, borrow up to 70% of the lot’s value (up to $400,000)
- For land loans, repayment terms up to 15 years
If you’re interested in connecting directly with a loan officer at Tidemark Federal Credit Union that specializes in construction loans, we can put you in touch with them directly.
3. Community Bank Delaware
Community Bank Delaware is a local bank in Delaware that caters to the specific needs of the citizens of the state. They are included in our list because they offer both construction loans and lot loans, so you can purchase land even if you’re not yet ready to build.
Here are the details provided by Community Bank Delaware with respect to their construction loan and lot loan programs:
- Can work with any size home.
- Lot loans available if you want to secure the land
- Can provide construction financing to buy the lot and build the home all in one step.
- Will provide funds to acquire the lot, then work with your builder to advance funds to complete your new home.
- Offers both conventional and jumbo construction loans.
If you’re interested in connecting directly with a loan officer at Community Bank Delaware that specializes in construction loans, we can put you in touch with them directly.
4. TD Bank
TD Bank is one of the largest banks in the country with over $600 billion in assets, making it the sixth-largest by deposits in the United States. Not surprisingly, TD Bank has a robust construction loan product and should be one that you consider before making your ultimate decision.
We spoke to a TD Bank loan officer who personally closed over $300 million of mortgages last year to learn more about the TD Bank construction loan program. Here are the details:
- 720-740 FICO score desired
- 20% down required on loans up to 1.5M
- 30% down required on loans up to 3M
- One-time close
- Primary or secondary homes are eligible
- Fixed rate and ARMs are available
- Purchased lot considered in the down payment
- No pre-payment penalties
- Interest rate locked before construction begins
- If land has been owned for at least 6 months, we will lend up to 80% of the appraised value of the entire project.
- If land has not been owned for at least 6 months, we will lend up to 80% of the land acquisition cost+cost of construction
- No Condos or Co-Ops. No investment properties.
If you’re interested in connecting directly with a loan officer at TD Bank that specializes in construction loans, we can put you in touch with them directly.
5. 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.
Does a Delaware construction loan make sense for you?
When you’re building a new home or commercial property, it can be tempting to finance the entire thing with the first bank who offers you money. But taking time to compare lenders offering construction loans can actually help you save money in the long run.
Construction loans are designed to help you get financing for your project as soon as you need it. They’re also designed to make sure the bank is on your team when it comes to completing the process. After all, the bank is just as invested as you are in making sure the home is constructed properly and on time.
With a traditional loan, there’s always some guesswork involved when it comes time to sign on the dotted line. Construction loans are made with fixed terms and specific amounts so that there’s no guessing about when or how much money will be available from day one. That way, you can start building with confidence.
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.