Construction Loans in Missouri

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4 Best Construction Loans in Missouri

Key Terms

  • Construction loans in Missouri are short-term loans designed to finance the building of a new home or renovating an existing one.
  • These loans typically have higher interest rates than traditional mortgages and require a larger down payment to mitigate the lender’s risk.
  • Borrowers can choose between a single-close or a two-close construction loan, with the single-close being a more streamlined and less expensive option.

Missouri is famous for its Gateway Arch in St. Louis which represents the westward expansion of the United States. With over 69,715 square miles, it’s no surprise that many people who live in Missouri want to find a piece for themselves and build a home.

Housing prices have been rising in the state lately. According to the Missouri Realtors Association, the average residential sales price is up 10.8% for the year and the average sale price is $289,511. Meanwhile, real estate experts estimate the cost of new home construction in Missouri ranges from $78 to $120 per square foot. 

Building a custom home in Missouri is also an opportunity to have everything you want in a home. However, the construction loan process is often complex and hard to navigate. 

Construction loans have shorter terms and higher interest rates than other home loans, but they do have some real advantages. The loan amount covers the cost of building and even rehabilitating a home. In this type of loan, the lender pays the loan to the contractor instead of the borrower. The contractor receives installment payments as construction milestones are reached. Because of this, your lender will work closely with you and the construction company every step of the way. After the building is complete, construction loans are either converted to traditional mortgage loans or paid in full.

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Reasons to consider a construction loan in Missouri

A construction loan is a great way for borrowers to obtain the necessary funds to cover the costs of buying land, building materials, design plans, labor, and other applicable costs. Some of the benefits associated with construction loans include:

  • You’re likely only required to pay the interest during construction. When the full project is complete, tenders typically require you to begin principal payments.
  • The loan terms are more flexible than traditional loans. You’ll provide your building plans for the lender to determine the possible loan rates, financing terms and conditions. 
  • Home construction loans often become permanent loans once the construction is complete. If you cannot convert the loan to a mortgage, you can likely negotiate to lock in the interest rate. 
  • You can choose your preferred contractor and architect to build your dream home.

Keep in mind that because there’s no home equity to secure the loan as collateral, lenders will carefully scrutinize your construction plans to ensure everything is in order. Expect regular check-ins with the contractor to ensure the project is following the expected timeline. This can be a good thing, however, since your contractor will be pressured to stay on track to receive the funds.  This will help the borrower plan better and consider everything involved more thoroughly, increasing the chances of a successful building project

You must meet a set of minimum requirements to qualify for most construction loans. Most lenders require an average FICO score of 680 and a downpayment of at least 20 percent of the costs associated with the project. There are also debt-to-income ratio requirements, just like a conventional loan. If you already have a mortgage you’re paying while you wait for your Missouri home to be complete, you’ll want to run the numbers to make sure you meet the minimum debt-to-income ratio of about 45 percent.

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4 Best construction loan lenders in Missouri

If you’re ready to look at the top construction mortgage lenders in Missouri, here are the best options we’ve found through our research.

1. The Missouri Bank

The Missouri Bank—as the name implies—is a regional bank in Missouri serving the local community. It’s an independently-owned and operated community bank, so if working with a local team is important to you, this is a bank to consider.

We wanted to know more about The Missouri Bank and specifically the construction loan it offers, so we contacted them for additional details. We couldn’t find a lot of information but here are the highlights:

  • Local loan officers with experience financing projects in the area.
  • Receive same-day disbursements upon presentment at our bank without going through a title company.

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. Bank of Old Monroe

Bank of Old Monroe started over 100 years ago when a local group of farmers gathered to talk about their vision of opening a community bank. The bank has grown over the years and currently serves the counties of Lincoln, Pike, Warren and St. Charles. If you’re in those areas, you may want to consider them for a construction loan.

We reached out to Bank of Old Monroe to get more details about their construction loan and here is what we found:

  • Can assist with land/lot purchases
  • Offers short-term, fixed-rate construction loans to finance the building of a home
  • Funds can be used to finance labor, materials, land development, etc.
  • The builder/buyer takes out a loan to cover the cost of the project before applying for permanent financing.
  • In most instances, the lender works with a title company to disburse funds in stages as work progresses on the construction project.
  • Typically, borrowers are obligated to pay interest on any disbursed funds drawn throughout the term of the loan.

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. Regional Missouri Bank

Regional Missouri Bank is a locally-owned bank with over 115 years of history that was started with only $10,000 of capital. The bank purchased the original lot to build the bank for $50. The bank has grown since that time and now serves the greater community, including helping with construction loans for those interested in building.

We contacted Regional Missouri Bank to learn more about their construction loan product and here’s what they said:

  • Available for primary residence or second home construction
  • Payments are interest-only during construction phase
  • Payments are made on the amount drawn on your loan sufficient to pay your builder
  • Construction draws applied in stages based on work completed
  • Prompt decision-making and processing in North Central Missouri

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. 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 Close. Only pay the closing cost once
  • Lock in your rate upfront and avoid interest rate risk
  • FHA loans, VA loans, 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 builder construction loans. 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.

Is a Missouri construction loan a good idea?

When it comes to construction loans in Missouri, there are many options for borrowers, therefore it’s best to explore different options and review their competitive rates to see who best suits your individual needs. Most lenders have flexible credit score criteria and minimum deposit options, making applying for their construction loans simple. 

If you are looking for more insight about construction loan programs in your state, the next step is to contact a loan officer with experience in construction loan projects so that you can continue educating yourself about the process so that you can make an informed decision.

Looking for a construction loan in a different state?

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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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