Utah is a beautiful state with plenty of outdoor activities, job opportunities, and a growing economy. Known as the Beehive State, it’s a landlocked state with plenty of land (over 82,000 square miles) and a lower-than-average population density.
When it comes to real estate, homes are more expensive than you might think due to a lack of housing inventory. The Utah Association of Realtors reports that the median sales price for a single family home is currently $535,050. This compares to the cost of building a home which ranges from $78 to $120 in Utah depending upon the location and build quality.
One solution to the high cost of homes and limited inventory is to build more homes. This can be done through public-private partnerships, where the government partners with developers to build new homes. Alternatively, borrowers can take out construction loans to build a home themselves, something that more and more people are considering.
You must have all your ducks in a row when looking for a construction loan. Lenders will want to ensure you’re qualified and have the necessary knowledge before giving you the green light. That’s why getting the pre-requisite knowledge is essential before going for construction loans.
If you’re considering a construction loan, read on to learn more about the benefits of construction loans and a list of some of the best lenders in Utah.
Advantages of a Utah construction loan
Construction loans can be beneficial when you want to build your dream home from start to finish, yet need to qualify for the financing upfront so that you know you have adequate funds for the entire project.
Most construction loan lenders in Utah will allow you to make interest-only payments on the construction loan during the construction period, which could last anywhere between six to 12 months. This makes it a little easier to afford your monthly payments given that you’ll also be covering the costs of your current home or apartment during the construction.
One disadvantage of pursuing a home construction loan is that the process is more complicated than for a home buyer buying a pre-built home. If you’re not up for the additional work and logistical problems of coordinating with an architect, builder and bank, you may not want to pursue a construction loan.
5 Best construction loan lenders in Utah
If you’re in the market to build a home in Utah, consider these construction mortgage loans that are available to state residents.
1. Bank of Utah
Bank of Utah is a financial institution that got its start more than 65 years ago after being established by an Ogden business executive named Frank M. Browning. They now have more than $1 billion in assets and 17 full-service branches across Utah, which offer a wide variety of financial products, including construction loans.
We reached out to Bank of Utah to learn more about their construction loan product and here’s what we found:
- No payments due during construction
- In-house processing for a timely turnaround
- Owner-builder construction loans are OK
- Same loan officer for both your construction loan and long-term mortgage loan.
- Also offers lot loans for purchase of raw land
If you’re interested in connecting directly with a loan officer at Bank of Utah 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 annual percentage 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. Washington Federal Bank
Washington Federal Bank (WaFd) is a regional bank but has offices throughout the southwest and northwest covering eight states. Based in Washington, they also lend in Idaho and have a construction loan product worth exploring.
We reached out to someone in the Idaho office of WaFd to learn more about their construction loan and here is what they said:
- Payments quoted may include estimates of taxes & insurance, so actual payments may be higher.
- Loans are subject to credit approval.
- Rates for owner occupied homes only.
- We handle all draws and inspections during construction.
- All-in-One Construction to Permanent Loan, construction and long-term financing are conveniently rolled into one loan, so the permanent interest rate is locked in before you break ground.
- Has a cross-collateral loan program, where you may be able to wait to sell your current home until after you move into your new home.
If you’re interested in connecting directly with a loan officer at WaFd that specializes in construction loans, we can put you in touch with them directly.
4. US Bank
US Bank is a large lender with a solid construction loan option. They can’t work with owner-builders, investment property, or manufactured homes, but if you fall outside of that category (e.g. a primary residence or a second home), then you may like the options.
We reached out directly to US Bank to get details on their program and this is what we heard back:
- 720 credit score required
- 10% down up to $750,000
- 20% down up to $1.5 million
- 25% down up to $2 million
- Loans up to $10 million are available
- Primary residence and Second homes only
- May use lot purchase as a down payment
- Major renovation loans are available
- 12-24 month Build periods are available
- 30 year fixed One-Time-Close or ARM (5/1, 7/1 & 10/1)
- One-time closing automatically converts to permanent financing at the end of construction
- Interest-only payments during construction
- No prepayment penalty
- No Spec or Investment Builds
- No Pre Starts
If you’re interested in connecting directly with a loan officer at US Bank that specializes in construction loans, we can put you in touch with them directly.
5. BMO Harris
BMO Harris is the 8th largest bank in North America by assets and provides financial services ranging from personal savings accounts 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 long-term loan 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.
Does a Utah construction loan make sense for you?
When considering a construction loan, assessing your needs and goals is essential for determining your eligibility. How much do you need to borrow? What type of property are you looking to build and what is its property value? What is your estimated budget? These crucial factors will determine your loan’s terms and mortgage rate.
When you need to borrow money for a construction project, it’s important to have the proper knowledge about construction loans. If you don’t know what you’re doing, you could wind up with a loan that’s not right for your project and cost you more in the long run.
An experienced construction loan specialist can help you understand the different types of loans available, what to look for in a lender, and how to get the best loan rates on your loan. They can also help you with the underwriting and paperwork and ensure everything is done correctly.
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.