South Carolina is known for its shoreline of subtropical beaches and marshlike sea islands, along with historic cities like Charleston. According to the U.S. Census Bureau, South Carolina is the sixth fastest-growing state, due largely to an influx of people moving to the state from other parts of the country.
This puts pressure on housing prices. The South Carolina Realtors Association reports that South Carolina home prices are up over 13.8 percent from last year, with a median sales price of $273,000.
Increasingly people turn to building new homes rather than trying to find one in an extremely competitive market. While the process of building a home takes many months (or up to a year), many people feel like the value of building a custom home is worth it.
If you’re considering building a dream home, keep reading to learn more about construction loans and the best lenders in South Carolina we found during our research.
What are construction loans?
Construction loans are short-term financing used to cover the costs of building a home. They can be for almost any duration, but the most common is one year.
Construction loans can be used to cover almost anything related to the construction project. This includes buying land, architectural planning costs, permitting fees, as well as labor and materials needed to build the home.
Types of South Carolina construction loans
There are two main types of home construction loans. The first, known as “construction-to-permanent” loans, is where the loan converts to a permanent mortgage loan when the build is completed.
At that time, interest rates are locked in. This allows you to avoid any fluctuations in the market during the construction period that could negatively impact interest rates.
Another advantage of construction-to-permanent loans is that you do have to negotiate a second loan (mortgage) upon completion of the project. This also allows you to pay only one set of closing costs. Also, in general, it is easier to qualify for these types of loans than construction-only loans.
As the name suggests, a construction-only loan is only for the costs of the build itself. You must pay them off at the completion of construction.
A big advantage of construction-only loans is that, since the lender assumes less risk, you are likely to get a lower interest rate, both on the construction loan and your mortgage. (i.e., mortgage-only rates will be more competitive than those coupled with a construction loan.)
5 Best construction loan lenders in South Carolina
If you’re considering building a new home in South Carolina, check out these construction mortgage loans that are available to state residents.
1. Fifth Third
Fifth Third is a large national bank with over $169 billion in assets. Its name is derived from a merger in 1909 between Third National Bank and Fifth National Bank. Not surprisingly, they offer construction loans throughout the midwest, including to those of you in South Carolina.
We contacted Fifth Third to get details on their construction loan and this is what they told us:
- Available for the construction of a primary residence (no real estate investors)
- Fixed rate and ARM construction loans available
- Low rates during construction
- Conforming and Jumbo Loan amounts available
- One-time closing fee
- Interest-only payments during construction
- Land purchase can be included in costs
If you’re interested in connecting directly with a loan officer at Fifth Third Bank that specializes in construction loans, we can put you in touch with them directly.
2. South Carolina Federal Credit Union
South Carolina Federal Credit Union, headquartered in North Charleston, SC, offers a full range of financial services to its members. As a credit union, it doesn’t have stockholders, since membership in the credit union means ownership of the non-for-profit institution. If you’re looking for a credit union to fund the building of a new property (or renovation of an existing property), this credit union might be for you.
We contacted South Carolina Federal Credit Union to get more information about their South Carolina new construction loan. Key highlights are below:
- Approval process involves loan review and builder review.
- Construction to Permanent Loans offered
- Requires additional loan documentation, underwriting and lender review.
- Can be used to purchase land
If you’re interested in connecting directly with a loan officer at South Carolina Federal Credit Union that specializes in construction loans, we can put you in touch with them directly.
3. BMO Harris
BMO Harris is the 8th largest bank in North America by assets and provides financial services ranging from personal and commercial banking to wealth management and investment services. Among these many products, they also provide a construction loan for those looking to build or renovate a home.
We spoke directly with a loan officer at BMO Harris to learn more about their construction loan program and were able to get quite a lot of details. Here is what you need to know:
- 700 Minimum credit score required
- 10% down up to $1M loan amount (No PMI…720+ credit score required)
- 20% down up to $2M loan amount
- 30% down up to $3M loan amount
- 35% down up to $4M loan amount
- 40% down up to $5M loan amount
- 45% down over $5M+ loan amount
- 10% of the loan amount required for reserves
- Primary residence and Second homes only (1 unit only)
- Ground-up or tear-down construction utilizes Loans-to-Cost
- Renovation utilizes As-Completed Value
- 12-24 month construction periods are available
- 30/20/15/10 Fixed or ARM (5/6, 7/6 & 10/6) available
- One-time closing automatically converts to permanent financing at the end of construction
- Only 1 appraisal needed
- 90 day lock same as 30 day pricing
- Relationship rate discounts are available
- Interest-only payments during construction
- No prepayment penalty
- No Spec or Investment Builds
- No Builder Approval Required (must be licensed with General Liability coverage)
- No owner builder
- No Pre-starts
- No Modular, Mobile for Manufactured homes
If you’re interested in connecting directly with a loan officer at BMO Harris 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 (first time homebuyers), 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.
Benefits of South Carolina construction loans
There are several ways in which a construction loan differs from a traditional loan. One distinction is that, since the loan is for an uncompleted building, money lenders tend to be more involved in the project.
For the same reason, construction loan rates will have variable rates that will move up and down with the prime rate. This is why it is important to find a solid loan officer that can advise you on the entire process so you’re making the best decision for you.
Also, lenders may not grant a lump sum for the project, but distribute funds as needed throughout the process. In this way, you can think of a construction loan as a line of credit for your project.
There is a built-in advantage to the borrower with construction loans that spread amounts out over time, as interest will not begin accruing until funds are received. Depending on the size of the project, this could save you thousands of dollars over the course of the build.
Another big advantage of a construction loan is that the borrower will not begin paying on the loan until the project is completed. This can be a huge plus if you are still making payments on your current home.
Now that you have an idea of how construction loans work, you can get the ball rolling. In a volatile real estate market, it is imperative that you work with a loan officer who specializes in construction loans.
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.