5 Best Construction Loans in Tennessee

Construction loans in Tennessee are available in a wide array of options depending on the lender you select and your personal financial situation.

Tennessee is known as the Volunteer State. It’s famous for its horizontal nature (anyone who has had to drive across it on Interstate 40 knows what I’m talking about), Beale Street, Memphis BBQ, country music and professional sports teams. Many people enjoy living in the state, whether it’s a primary residence or a vacation home.

The population of the state reflects its popularity, as the state is expected to top seven million people by the end of the year. The increase in population and the lack of housing inventory is pushing housing prices up for homebuyers, with the median sales price hitting $357,000 this year according to the Tennessee Realtors Association. Meanwhile, local real estate experts say that it costs approximately $62 to $95 per square foot to build in the state depending on build quality and location.

Construction loans are becoming a popular option for those looking to build a new home or renovate an existing property. They also provide many other benefits when compared with traditional mortgages. Let’s briefly go over some of the main benefits you’ll enjoy when you take out a Tennessee construction loan so that you can decide if this is a good option for you. 

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Benefits of a new construction loan in Tennessee

If you’re building a new home, then this is the perfect type of loan for you. Your lender will help you with the approval process and give you funds upfront to cover the cost of your construction project. You can use those funds as needed throughout the process and pay off the remaining balance when your project is complete. Because this is a construction loan, it’s going to include some flexibility, which means more options for you!

First of all, you don’t have to wait until all of your materials are in place before the loan can be granted; your lender will just need to see the architecture plans and the builder contract to authorize the disbursement of the funds, which are usually made in stages or “draws” as your project makes progress. 

The only thing that may require a separate application is landscaping costs because most lenders don’t offer them as part of their standard packages. All things considered, with a Tennessee construction loan, you’ll have the freedom and flexibility to construct the home of your dreams without breaking the bank.

Get Quotes for Your Construction Loan

5 Top Tennessee construction loan lenders

If you’re ready to check out the best construction mortgage lenders in Tennessee, here are the best options we’ve found through our research.

1. Home Federal Bank of Tennessee

Home Federal Bank of Tennessee is a full-service bank located in Knoxville and founded in 1924. They offer a complete line of personal, home, business and commercial banking services with competitive rates, including home construction loans.

We specifically wanted to learn more about the construction loans offered by Home Federal Bank of Tennessee, so we reached out to gather some information. Here are the things you need to know:

  • 30-year, fixed-rate construction/permanent loan available
  • Fixed APR for the full term of the loan, with a one-time closing.
  • Payments are interest-only for the first 12 months based on amount drawn, followed by 360 monthly payments.
  • For owner-occupied single-family homes only.

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. BMO Harris

BMO Harris is the 8th largest bank in North America by assets and provides financial services ranging from personal and commercial banking and credit cards 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
  • Borrower 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

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. Fifth Third

Fifth Third is one of the largest banks in the country 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 Tenenssee.

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
  • 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

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. Wilson Bank & Trust

Wilson Bank & Trust is a community bank serving Middle Tennessee. If you’re interested in working with someone local, this could be the bank for you. They are independently owned and not part of a major banking platform. They offer a full range of financial products, including construction loans.

We gathered information the construction loans specifically offered by Wilson Bank & Trust and here is what we found:

  • Short-term loan that covers both labor and material costs
  • Payments are interest-only during construction phase.
  • Title insurance not required on loans less than $500,000
  • Permanent mortgage financing options after construction is complete
  • Local decision-making and processing in Middle Tennessee

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.

5. Wintrust Mortgage

Wintrust Mortgage is one of the top 20 bank-owned retail mortgage loan 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 payment 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.

Does a Tennessee construction loan make sense for you?

If you’re considering taking out a Tennessee construction loan, there are several things to consider before diving in:

First, you should think about whether or not you can afford to cover the interest payments on the construction loan while you’re also paying for your current living situation.

Second, you should consider how long it will take you to build your home and whether you are ready for a project of this length and complexity.

Third, make sure you have a team together that can support you through the process. That means an architect, a builder and a loan officer at the bank that has specific experience with construction loans. These mortgages are a little different than traditional mortgage loans, so you want someone with construction experience.

Construction loans aren’t the perfect solution for everyone, but for many people, they are a great way to build a home, save some money, and realize their dreams. So, if you want to construct the dream home that you’ve always wanted, then consider a Tennessee construction loan. 

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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