Vermont is a beautiful state that is home to many people and businesses. Known as the Green Mountain State, the population of Vermont is about 647,000 people. Even though it’s a small state by land, Vermont is still relatively sparsely populated.
Despite the small population, due to a lack of housing inventory and demand for vacation homes (Vermont is a popular ski attraction), the average sales price of a single family home is $438,127 according to the Vermont Realtors Association. Home prices are expected to continue rising as more people move into the state out of larger cities like New York City and Boston, where housing costs have become too much for many families to afford.
Many homebuyers are turning to construction loans rather than getting home loans because they figure that in this market they might as well build a new home rather than battle with sellers and other buyers in the housing market. Local real estate experts have reported that the average cost of building a new home in Vermont is $148.23 per square foot, making it an attractive option for some.
Construction loans also allow you to borrow the money upfront to finance the construction and to use the money in stages as the construction project continues. Keep reading if this is something you’re considering, as we’ll cover the advantages and disadvantages of construction loans along with a list of the best construction loan lenders in Vermont that we found during our research.
Benefits of a new construction loan in Vermont
If you’re looking to build a new house, there are many reasons why a construction loan is the best route for you. It’s important to understand the benefits of getting a Vermont construction loan so you can make an informed decision about how to move forward with your project.
First and foremost, if you’re looking to build a home from scratch, you get to start with a blank slate. You won’t have to worry about the headaches that come with buying an existing property and trying to fix it up so that it’s livable again. Instead, you can focus on the design of your new home and decide exactly what kind of space will suit your needs best before even purchasing land or hiring an architect.
Also, because a bank will be involved in the construction, if it’s a construction-to-permanent loan you will benefit from the bank oversight of the project. After all, they have just as much incentive to get the house (their collateral) finished on time and without flaws.
5 Best Vermont construction loan lenders
If you’re in the market for building a new home in Vermont, consider these construction mortgage loans that are available to state residents.
1. Vermont State Employees Credit Union
The Vermont State Employees Credit Union got its start in 1946 when employees of the State of Vermont came together to form the financial institution. They are a not-for-profit credit union where the members own the company. VSECU has a large offering of financial products covering everything from personal through business banking, including construction and land loans.
We reached out to Vermont State Employees Credit Union to learn more about their construction loan and here is what we gathered:
- They offer an adjustable rate loan with a 15-year term for the purchase and finance of your lot or land.
- You can choose to apply at any time in the construction process.
- Select your own general contractor to oversee your construction. A cost overrun, of up to 20%, will be applied to construction costs.
- The land or lot must pass a perc test, and cannot exceed 25 acres.
- If you choose to wait and build later, you will pay monthly mortgage payments on the land with a fixed monthly payment for three years and then the rate may adjust annually thereafter.
- You will need to hire a general contractor. Professionals are required. You cannot act as the general contractor for your own project.
- Your down payment will go into your project prior to any loan disbursements.
- Construction funds are disbursed upon completion of work with a 1-year, fixed-rate loan.
- After the construction loan period is completed they can refinance your land and construction loans into one of our traditional mortgage loans.
If you’re interested in connecting directly with a loan officer at Vermont State Employees Credit Union that specializes in construction loans, we can put you in touch with them directly.
2. Citizens Bank
Citizens Bank is one the largest banks in the United States with over $160 billion in assets, making it the 13th largest retail bank in the United States. With a long history and so many assets, it’s not surprising that Citizens Bank offers a construction loan. The question is: does it stack up to the competition?
We contacted Citizens Bank to learn more about their construction loan product and here is what we found:
- Construction-to-permanent program allows you to combine your construction or renovation financing and permanent mortgage into one loan.
- One closing and one set of closing costs.
- Include the purchase of your lot in the financing or build on a lot you already own.
- Make interest-only payments during the construction phase.
- You can lock in your permanent mortgage interest rate before construction begins.
If you’re interested in connecting directly with a loan officer at Citizens Bank that specializes in construction loans, we can put you in touch with them directly.
3. 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.
4. Union Bank
Union Bank operates in Vermont and New Hampshire as a local community bank. They’ve been doing business since 1891, so you can trust that they’ll be here for the years to come. One of their local products is a construction loan aimed at those looking to build or renovate a loan.
We did some digging on Union Bank to learn more about their construction loan. Here are the key terms and highlights that you need to know:
- Available for new home construction, additions, renovations or small commercial buildings.
- Borrowers with suitable experience can act as the general contractor or perform some—or all—of the construction.
- Union Bank also offers Land Loans to help you finance the purchase of land, whether it’s improved or a raw land parcel.
- The bank pays contractors directly from your construction-loan checking account.
- There are no minimum draw amounts, and you can request draws as often as needed.
- For Land Loans, Union Bank offers either fixed financing, with a set interest rate and fixed payment over the life of the loan, or adjustable-rate financing, which has a variable interest rate and payment that may change over the life of the loan.
- For Build/Construction Loans, they offer an eight-month term at competitive rates with the possibility of a four-month renewal.
- Build Loans can be used to finance the construction of one to four-family, owner-occupied properties as well as small commercial projects.
- Land Plot and Construction Loans can be used for building lots for future use as a primary residence or vacation home. They can also be used to refinance a land purchase.
- To qualify, lots must include water and wastewater engineering, public road frontage and power, as well as the necessary state and local permits.
If you’re interested in connecting directly with a loan officer at Union Bank that specializes in construction loans, we can put you in touch with them directly.
5. 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 occupancy homes are eligible
- Fixed rate and Adjustable rate mortgages (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.
Does a Vermont construction loan make sense for you?
If you’re considering building a custom home or other new construction project, you may be wondering if it makes sense to get a construction loan. Getting a construction loan can help finance the construction of a dream home or vacation property in a way that makes sense for your budget.
It’s easier than ever to get approved for a construction loan. Banks and lenders want to know that they’ll be able to get paid back, so they’ve opened up their doors to people who want to build homes in order to make sure that happens.
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.