Building custom home in Little Rock, Arkansas is exciting – it’s your chance to design a home perfectly suited to your family. However, financing the construction can feel complex and intimidating. At Silver Field Construction, we help our clients navigate the process of custom home financing in Little Rock every day. In this guide, we’ll break down everything you need to know about construction loans (including construction-to-permanent loans) so you can build with confidence. Whether you’re researching construction loans Little Rock AR or curious about one-time-close mortgages, we’ve got you covered in a conversational, step-by-step way. Let’s dive in!
Table of Contents
Construction Loans vs. Construction-to-Permanent Loans
When planning to build, you’ll typically choose between a standard construction loan and a construction-to-permanent loan. It’s important to understand the difference:
- Construction Loan (Standard) – This is a short-term, interest-only loan used solely to fund the building of your home. It usually lasts around 6 to 18 months (just long enough to complete construction). During this time, you pay interest only on the amounts drawn for the build. Once the home is finished and passes final inspection, you must refinance or pay off the construction loan with a separate mortgage for the house. Essentially, it’s a two-step process (one loan for construction, then another for the permanent mortgage). The benefit is flexibility in choosing your permanent mortgage later, but it means two closings and potentially more fees.
- Construction-to-Permanent Loan (One-Time Close) – This option combines your construction financing and long-term mortgage into a single loan and single closing. The loan finances the construction of the house and automatically converts into a regular home mortgage (usually a 15- or 30-year term) once construction is complete. You lock in your mortgage terms upfront and only pay closing costs once, which can save money and hassle. During construction, it often functions like a standard construction loan (interest-only payments, draw disbursements, etc.), but when the home is done, it simply converts to a permanent loan (often once a certificate of occupancy is issued). This type is also called a “one-time close” loan. It streamlines the process, though you’ll need to have your long-term financing details decided before breaking ground.
Which to choose? It depends on your preferences and situation. Many Little Rock homebuyers appreciate the simplicity of a construction-to-permanent loan in Arkansas (no second closing). Others opt for separate loans so they can shop for the best mortgage rates upon completion. We at Silver Field Construction have seen both approaches and can help you decide what’s best for your project. The good news is that both options are available in Little Rock, and many local lenders offer both formats. Next, let’s look at who those lenders are and what they require.
Local Lenders and Construction Loan Options in Little Rock
One advantage of building in Little Rock, AR is the variety of local banks and credit unions experienced in construction financing. You’re not on your own – there are several reputable institutions that offer construction loans (both single-close and two-close options). Here are a few key local lenders and what they offer:
- Arvest Bank – As one of Arkansas’s largest banks, Arvest has decades of experience in home construction financing. They offer fixed-rate construction loans with interest-only payments during the build, and they’ll finance up to 85% of the project cost on conforming loans (and up to 80% on larger jumbo projects)
. This means qualified borrowers might only need ~15% down in some cases. Arvest also prides itself on customer service – they service 99% of their mortgages in-house, so you continue dealing with Arvest directly for the life of your loan . - Centennial Bank – A community-focused bank in Arkansas, Centennial Bank offers construction loans and construction-to-permanent loans. They even have a special Home Builder Affinity Program for approved builders and their clients. Under this program, eligible borrowers receive a lender credit (about 1% of the loan amount, up to $3,000) that can be used toward closing costs
. Centennial’s program also pairs builders and buyers with a local loan originator for streamlined communication and “proven construction workflow” oversight . In short, Centennial Bank is very invested in new construction projects and offers incentives to make financing a new custom home easier. - First Security Bank – First Security is a locally owned Arkansas bank known for personal service. They offer all types of mortgage loans to home buyers across Arkansas, including construction loans. With First Security, decisions are made locally, which can mean faster approvals. They understand the Arkansas housing market well. While specific terms aren’t published online, borrowers can expect competitive rates and standard requirements (similar to other banks – e.g. around 20% down, solid credit, etc.). First Security’s advantage is the hands-on guidance their loan officers provide to local customers throughout the construction process.
- Arkansas Federal Credit Union (AFCU) – AFCU is a popular credit union in the Little Rock area that provides construction loans with a member-first approach. They highlight benefits like interest-only payments during construction to save you money
and local servicing (so you work with a local team). A unique benefit AFCU confirms is that if you already own your land, you can use your land’s equity toward the down payment . (We’ll discuss this more later, but it’s great news for those who have a lot already.) AFCU, like many lenders, does require you to use a licensed builder – they will review and approve your builder before the loan is finalized , which is one more reason to partner with a reputable builder like Silver Field Construction. - Telcoe Federal Credit Union – Another Arkansas-based credit union, Telcoe offers construction loans with a very transparent approach. They require a minimum 20% down payment (equity) toward the total project (land + construction)
and a minimum credit score of 680 with excellent credit history . Telcoe provides a detailed FAQ on construction loans, emphasizing that an appraiser will inspect at stages, funds are disbursed on a draw schedule, and you pay interest only during construction. They also may allow a conversion to a permanent loan at completion (or you take a separate mortgage). We mention Telcoe here because their requirements (20% down, 680+ credit) are pretty typical of many local lenders in Little Rock. If you meet those benchmarks, you’ll find several banks and credit unions ready to work with you.
These are just a few examples – other institutions like Simmons Bank, Bank OZK, and smaller community banks in Little Rock also offer construction financing. The key takeaway is that you have options. We recommend shopping around local lenders or asking Silver Field Construction for recommendations. We’ve built relationships with loan officers around town and can point you toward lenders that match your needs (for example, if you need a low-down-payment option or are using a VA loan, we know which institutions might fit best).
What It Takes to Qualify: Down Payments, Loan-to-Cost, and Credit
Now, let’s talk about typical requirements for a construction loan in Little Rock. Every lender is a bit different, but generally you should be prepared for the following:
- Down Payment (Equity) – Construction loans usually require a larger down payment than a standard home purchase. Typically, you’ll need to invest about 10%–20% of the total project cost as a down payment. In lender terms, this means they will finance roughly 80%–90% of the project (this finance percentage is called the loan-to-cost ratio). For example, if your land + construction budget is $400,000, you may need to bring $40,000–$80,000 of your own funds (or equity) to the table. Many Arkansas lenders, including local banks, err on the conservative side of this range – 20% down is common. Some, however, allow less. (Arvest Bank, for instance, will finance up to 85% on some loans
, which effectively is a 15% down requirement.) It’s important to note that special loan programs can reduce the needed down payment: FHA construction-to-perm loans might require only 3.5% down, and VA construction loans can even be 0% down for qualified veterans. Those government-backed options have their own eligibility criteria but are worth exploring if you qualify. For most borrowers in Little Rock, plan on that 10–20% range in either cash or equity. We’ll discuss using land equity momentarily, which can substitute for cash. - Loan-to-Cost (LTC) Ratio – As mentioned, lenders talk about financing in terms of percentage of project cost. If you put 20% down, that’s an 80% LTC (the bank loans 80% of the cost). If you qualify for a 10% down program, that’s a 90% LTC. In Little Rock, expect most lenders to max out around 80%–85% LTC on construction loans (meaning you provide 15%–20% in equity). This ensures you have “skin in the game.” Keep in mind, the lender will base this on whichever is less: your project cost or the appraised value of the finished home. They will order an appraisal of the plans/specs. If that “as-completed” appraisal comes in lower than expected, it could affect how much they’ll lend (they won’t lend 85% of a cost that exceeds appraised value). Working with an experienced builder like us helps ensure your budget aligns with market values. Generally though, if you have ~20% equity (through cash and/or land value), you’ll meet the typical LTC requirement for Arkansas construction loans
. - Credit Score & Financial Health – Construction lending is considered higher risk for banks (since the house isn’t built yet), so they look for borrowers with solid credit and finances. In Little Rock, a minimum credit score around 680 is a common requirement. Some lenders may go lower (for example, FHA one-time-close loans might allow 620 with additional conditions), but 680+ puts you in a strong position for both approval and a good interest rate. Aside from the numeric score, lenders will review your credit history (they want to see a track record of on-time payments and responsible credit use)
. They’ll also calculate your debt-to-income ratio (comparing your monthly debt payments to your income) to ensure you can afford the construction loan payments and eventually the mortgage payments. Generally, you want a stable job, manageable existing debts, and some cash reserves. If you’re unsure about your credit or financial standing, we recommend getting pre-qualified with a lender early – this will give you a clear picture of what you can afford. Silver Field Construction can connect you with lenders for a pre-qualification to identify any hurdles (like if you need to raise your credit score a bit before applying). Bottom line: aim for a good credit score, low debt, and stable income to smoothly qualify. - Licensed Builder – One often overlooked requirement is that virtually all lenders will require you to hire a licensed general contractor (builder) for the project. Construction loans aren’t typically available to owner-builders without a licensed pro. Lenders may even have an approval process for the builder. For example, Arkansas Federal Credit Union notes that they review your builder’s qualifications before finalizing the loan
. This is to ensure the home will be built correctly and completed – the bank is investing in the project too! The good news is Silver Field Construction meets all the criteria as a licensed, insured, and experienced builder in Arkansas. If you choose us as your builder, any reputable local lender will be happy with that choice (and we can supply whatever documentation they need, like our license info, insurance, references, etc.). Using a trusted builder not only helps you get loan approval, but also may let the lender offer better terms (for instance, some banks allow a slightly smaller down payment if a known builder is doing the work). The rationale is that a skilled builder means less risk of cost overruns or delays.
In summary, qualifying for a construction loan in Little Rock means having some equity (cash or land) invested, decent credit (~680+), and partnering with a qualified builder. If you check those boxes, you’re well on your way. Next, let’s explore how your land’s value can play into that down payment equation.
Using Land Value as a Down Payment
Do you already own a lot or piece of land where you plan to build? If so, you have a big advantage: the equity in your land can usually be applied toward your down payment. This is a common practice in Arkansas. Here’s how it works:
- When you own land outright (no mortgage on it), the lender will have the land appraised as part of the overall project appraisal. Whatever the current appraised value of the land is, counts as equity you’re bringing in. For example, if your land appraised at $50,000 and the total build cost is $300,000, the project total is $350,000. If a bank requires 20% down (~$70k on $350k), your land equity of $50k covers a large portion of that, and you would only need to bring ~$20k in cash. In some cases, all of your required down payment can be satisfied by land value if the numbers work out. Arkansas lenders explicitly acknowledge this: one local lender’s FAQ confirms that with a current appraisal, your land equity can be used toward the down payment. This is extremely helpful for buyers who bought their lot years ago or got it at a bargain – the appreciation or existing value is like a built-in down payment asset.
- If you still owe money on the land (say you have a loan from when you purchased the lot), the construction loan typically will pay off that land loan as part of the first draw. Essentially, the bank will fold the remaining land balance into the new construction loan. In this scenario, only your equity in the land counts toward the down payment, not the full land value. For instance, you bought the lot for $50,000 with a loan, and you still owe $20,000. If it’s still worth $50k, your equity is $30k. The bank might use that $30k equity toward the requirement, then use part of the new loan to pay the $20k balance at closing. You would need to cover any additional down payment gap in cash. The key point is the lender needs a clear title on the land when they start the construction loan (they don’t want a second lien in place). So they will pay off any existing liens on the land through the construction loan closing, and then count whatever equity was there as your contribution.
- It’s important to get an accurate appraisal of your land. If you suspect your lot’s value has gone up since you bought it (perhaps due to improvements or rising market values in that area of Little Rock), that higher value directly benefits your financing picture. The lender will order their own appraisal, but it may be useful to discuss recent comparable land sales with your builder or a realtor to gauge what your land might appraise for. We often see clients pleasantly surprised that their lot is worth more than they thought, which reduces how much cash they need to put down.
In summary, land = equity. Little Rock banks will typically treat your land value as if it were a cash down payment. This can significantly lower the out-of-pocket cash you need at closing
How Construction Loan Funds Are Disbursed (Draw Schedules)
Unlike a traditional home mortgage (where the full loan amount is given to the seller at closing), a construction loan doesn’t provide all the money upfront. Instead, lenders use a “draw schedule” to disburse funds gradually as the home is built. Understanding this process will help you know how bills get paid during construction and what your payments will look like. Here’s an overview of how draws and payments work in Little Rock construction loans:
- Initial Closing & Land Payoff: At the loan closing (before construction starts), the lender will usually release an initial amount to cover any immediate costs. This often includes paying off your land (if it wasn’t already owned free and clear) and any upfront builder deposits or permits if needed. Essentially, they ensure the land is paid for and in the loan, and you’ve contributed your required down payment or equity at this point. After closing, the remaining funds are held by the bank to be used for construction.
- Draw Schedule: The rest of the loan funds are released in installments called draws. The draw schedule is agreed upon ahead of time and is tied to construction milestones. For example, a common draw schedule might be: X% of the loan at foundation completion, X% at dry-in (when the house is framed and roofed), X% at rough-in of plumbing/electrical, X% at drywall, and the final balance at completion. Each lender’s draw schedule can differ, but it generally aligns with major phases of progress. You, your builder, and the bank will work out a draw plan that matches the construction timeline. At Silver Field Construction, we are very familiar with this – we typically help provide the lender a budget breakdown and timeline, and they use that to structure the draws (ensuring the cash flows match the work in progress).
- Inspection and Approval: Before each draw is released, the lender will send out an inspector or appraiser to verify that the work claimed is completed. For instance, if we request a draw for the foundation, an inspector visits the site to confirm the foundation is indeed finished and meets the plans. This protects all parties: it ensures funds are only used for completed work and that the project isn’t behind schedule. In Little Rock, many banks do monthly inspections or have specific checkpoints. One Arkansas lender notes that draws should generally correspond to the percentage of project completion – if something is off by more than a small tolerance, they may pause to investigate. As a builder, we carefully schedule inspections and draw requests so that there aren’t delays. Once the inspection is satisfied, the lender releases the funds for that stage. The funds typically go into a special construction checking account or directly to the builder/subcontractors. Often, the borrower (you) will have to sign off on the draw request as well, acknowledging the amount to be disbursed. Communication is key – Silver Field ensures that both you and the bank are kept up to date at each draw.
- Interest-Only Payments During Construction: One big relief during construction is that you only pay interest on the money that has been drawn out, not on the whole loan amount from day one. This means your payments start small and increase gradually. For example, if only $50,000 of the loan has been used in the first month (say for land clearing and foundation), you’re paying interest on that $50k only. If the interest rate is, say, 6%, the monthly interest on $50k is about $250. The next month, if the total drawn goes up to $100k, your interest for that month might be ~$500, and so on. As more funds are drawn, your interest payments will rise accordingly
. This incremental approach helps keep your costs lower while the house is being built, since you’re not yet occupying it. Most construction loans are structured this way, and it’s a big financial ease for homeowners. Just remember, you do need to budget for these interest payments during the build period (they are due monthly). Some lenders may allow you to roll interest into the loan (by making the loan slightly larger as an “interest reserve”), but many in Little Rock have you pay it out-of-pocket each month. Silver Field can provide you with a draw schedule estimate, which lets you project roughly what your interest payments will be each month as the balance grows. Typically, the highest interest-only payment will be in the final month of construction when the most money has been drawn. - Keeping Project On Budget: The draw process is also a safeguard to keep the project on financial track. Because funds are controlled, it’s hard for a project to run drastically over-budget without everyone noticing early. If there are changes or upgrades you decide on mid-way (common in custom builds), note that if it increases the cost, you might need to cover that difference out-of-pocket or seek a loan change order. Banks generally won’t just increase the loan amount beyond the original contract without re-approval. So, it’s wise to stick to the budget or have a contingency fund. We at Silver Field Construction take pride in meticulous planning and transparent, fixed pricing whenever possible to avoid budget surprises. We also coordinate draws in a way that subcontractors and suppliers are paid on time, keeping the project moving smoothly. The bank’s oversight paired with a reliable builder creates a system of checks-and-balances that results in a successful home build on budget.
In short, expect your construction loan funds to be disbursed in stages, with inspections at each stage, and you’ll be making interest-only payments that start low and gradually increase as your dream home takes shape. This system might sound complicated, but in practice it runs like clockwork when managed well. And don’t worry – Silver Field will help guide you through your first draw request and every one thereafter. We’re used to the paperwork and timing, so you can focus on the excitement of progress rather than the minutiae of banking.
From Construction Loan to Permanent Mortgage
What happens when your new home is finally complete? The financing will transition from the short-term construction phase to a long-term home loan (the mortgage). The exact process depends on whether you chose a one-time-close construction-to-permanent loan or a two-step loan, but let’s break down both scenarios:
- If You Have a Construction-to-Permanent (One-Time Close) Loan: In this case, you’ve already done one closing and signed documents for the permanent phase in advance. Typically, once the home is finished and the city/county issues a Certificate of Occupancy (proving the home is ready and safe to live in), the construction phase ends. Many lenders will have a final inspection or appraisal to confirm everything is built as planned. Then your loan seamlessly “modifies” or converts into a standard mortgage. You’ll start making regular principal-and-interest mortgage payments (often the first payment is due the month after conversion). The interest rate and term were likely locked in from the beginning, so there’s no surprise on the payment amount. For example, if you locked in a 30-year fixed at 6% before construction, once it converts, you’ll have a normal 30-year loan at 6% with the full balance amortized over 30 years. The big advantage here is you do not have to go through another closing or re-qualify. You handled that upfront. You also avoided any risk of interest rates rising during construction (since you locked your rate). One thing to be aware of: if construction took significantly less or more time than expected, some lenders may have a provision to adjust the rate or terms slightly, but generally one-time close loans are designed to carry you through without changes. We recommend staying in close contact with your lender as the project nears completion so everyone is prepared to finalize the conversion. Silver Field will notify your lender well in advance of the expected completion date so they can start their closing process (final inspections, converting the loan departments, etc.). Usually, it’s a pretty smooth finish – you get the keys and your loan automatically becomes a mortgage (often the loan will simply roll into a typical mortgage servicing cycle).
- If You Have a Stand-Alone Construction Loan (Two-Time Close): In this scenario, your construction loan will mature at the end of construction, and you will need to obtain a separate permanent mortgage to pay it off. Suppose your construction loan term was 12 months – ideally, your house is done by then. As you approach the final 1-2 months of construction, you should be in touch with your mortgage lender (which could be the same bank or a different one) to start the mortgage application for the completed home. Essentially, you’ll go through the normal home loan process: updated income documents, credit check, an appraisal of the finished house, etc. If you were prequalified before, it may just be a matter of updating and finalizing. When the house is complete and has a Certificate of Occupancy, you’ll go to a closing to refinance the construction loan into a permanent loan. The new mortgage will pay off the construction loan balance in full, and you will begin making mortgage payments to the new lender. It’s critical not to delay this process because your construction loan is short-term – if the loan term ends and you haven’t paid it off or extended it, you could face penalties or default. So, usually we advise clients to lock in their permanent loan as early as they can (many lenders can lock a rate 30-60 days before completion). One downside of the two-close approach is you pay closing costs twice (once for the construction loan, and again for the mortgage refi). The upside is you had flexibility – you didn’t have to commit to a mortgage program before the home was built. If interest rates improved or your financial situation changed, you can take advantage of that at the end. In the current market, a lot of Arkansas borrowers still opt for one-time closes to avoid rate risk, but if rates are stable or you expect them to drop, a two-time loan gives you the chance to snag a better rate later.
Regardless of which path, once your loan transitions to a permanent mortgage, things become simple: you’ll make one monthly payment (covering principal, interest, and likely escrow for taxes/insurance) just like any homeowner with a traditional mortgage. One thing to note is that with many construction loans (especially if you went with a local bank), you might have the option to continue with the same bank for the mortgage or switch to another lender. Some local banks (like Arvest) will actually service the mortgage themselves and you just keep paying them
In summary, the end game of a construction loan is either a smooth conversion to a mortgage (if it’s a construction-to-perm loan) or a separate mortgage closing to take out the construction loan. Both routes get you to the same result: a completed custom home Little Rock and a regular home loan payment going forward. The key is planning ahead for that transition so there are no surprises. The result is worth it – you now have the exact home you wanted, financed at terms hopefully arranged to fit your budget for the long run.
Preparing Your Loan Application: Plans, Permits, and Paperwork
One of the best ways to ensure a quick and smooth loan approval is to be prepared with documentation. Construction loans require a bit more paperwork upfront than a standard home purchase because the lender is essentially evaluating a project, not just a property. As a builder, Silver Field Construction assists our clients in compiling many of these necessary documents. Here’s a list of what you’ll typically need to prepare when applying for a construction loan in Little Rock:
- House Plans and Specifications: You will need to provide a complete set of blueprints or construction plans for the home, along with details on the materials and specifications. Lenders use these to get an appraisal of the “to-be-built” home. The plans don’t always have to be architect-stamped (unless required by local code for certain structures), but they should be professional and detailed. We help our clients by working with architects/designers to produce lender-ready plan sets. Along with blueprints, be ready to supply spec sheets – for example, what type of finishes, flooring, appliances, etc., are planned (or at least the level of quality). This can be part of the contract or a separate document. The more detail, the easier for the appraiser to assign a value and for the bank to be comfortable that you’re building a home appropriate for the loan amount.
- Contractor’s Bid/Construction Contract: The lender will want to see a builders contract or a detailed line-item cost breakdown for the project. Essentially, this is the budget for construction. It includes all costs: labor, materials, permits, utilities, etc. At Silver Field, once your plans are finalized, we provide a fixed-price contract that outlines the total cost to build according to those plans (with allowances for any items not yet selected). This contract is submitted to the bank. It shows them, for instance, that the foundation will cost $X, framing $Y, plumbing $Z, and so on, adding up to the total build cost. The bank uses this to verify that the loan amount makes sense relative to costs. If you have a cost-plus contract (where the final cost could vary), the bank may require additional contingencies or proof of funds for overruns. In Arkansas, some banks ask cost-plus borrowers to show a reserve equal to maybe 5-10% of the budget in case of overages. If you work with us, we typically do a fixed price or a guaranteed maximum price, which most lenders (and clients!) prefer because it limits surprise costs. In any case, have the builder’s bid or contract ready. We’re happy to handle the interaction with the lender on the cost breakdown – we speak their language when it comes to budgets and will ensure they have everything needed.
- Build Timeline: Be prepared to provide an estimated construction timeline or schedule. Lenders will ask, “How long will this take?” Typically, construction loans are made for 12 months, but can often be extended to 18 months if needed (some even 24 for very large homes). We will draft a timeline that shows the start and finish of major phases (e.g., month 1 clearing and foundation, month 2-3 framing, etc., up to completion). This timeline helps the bank set the loan term and also plan the draw schedule. It doesn’t need to be exact (weather and other factors introduce some unpredictability), but it should be a realistic roadmap. Silver Field prides itself on finishing on schedule, so we create an achievable timeline and then stick to it. Providing this schedule to the lender also demonstrates that you and your builder have a clear plan, which builds confidence in the project.
- Personal Financial Documents: In addition to the project-related papers, you’ll need to submit all the typical financial documents required for a mortgage. This includes recent pay stubs (usually last 30 days), recent bank statements (last 1-2 months), last two years of W-2s, and the last two years of tax returns (personal, and business returns if self-employed)
. Essentially, the lender wants to verify your income and assets. If you have other real estate or an existing home, they might ask for information on those (e.g., mortgage statements, tax bills). You’ll also sign a form allowing them to pull your credit report. It’s a good idea to avoid big financial changes during this process – like buying a new car or quitting your job – as that can complicate approval. The paperwork might seem extensive, but it’s identical to what you’d need for any home loan, plus a few extras. For a construction loan, you might also need to provide documentation on the land (for example, a copy of the deed or settlement statement proving you own it, and possibly a copy of the title insurance from when you bought the land). If the land was gifted or recently purchased, they’ll want the paper trail of that as well. - Permits and Approvals: While you usually don’t need the building permit in hand to apply for the loan, some lenders will want to know that the plans have been submitted for permit or are permit-ready. In some cases (like the New Silver guide suggests
), a lender might ask for proof of a building permit before they will schedule the loan closing. In Little Rock, getting a building permit requires the plans and often a licensed contractor’s info. Silver Field handles the permit application for our clients, and we can provide evidence to the bank that the permit is underway or approved. Additionally, any other approvals (for example, neighborhood architectural committee approvals in certain subdivisions, or septic system permits for rural properties) should be gathered and ready to show. The smoother you can make it look, the more confidence the lender has. We coordinate closely with you on this step so that by the time you close on the loan, all systems are go to actually start construction immediately. - Insurance: You will need to arrange a builder’s risk insurance policy or confirm that your builder has one that covers the project. Builder’s risk insurance covers the structure and materials during construction (against fire, theft, etc.). Sometimes the builder carries this; other times the owner is asked to. Many lenders will ask for the builder’s risk policy or an insurance binder as a condition of loan closing. Additionally, once the home is done, you’ll need a standard homeowner’s insurance policy – but during construction, builder’s risk is the key. Silver Field has general liability insurance and can help facilitate builder’s risk coverage to make sure everyone (you, us, the bank) is protected during the build.
To summarize the paperwork: think of it in two buckets – (1) Your personal financial documents (income, assets, credit) and (2) the construction project documents (plans, contract, budget, timeline, permits). If you come to the table with all these items prepared, your loan process can be surprisingly quick. One Arkansas lender notes that having complete plans and permits is crucial for a smooth application. From our experience, the more complete the package we submit to the bank, the fewer follow-up questions and conditions there will be. Silver Field Construction assists our clients in every step of assembling this package – we often send the plans, cost breakdown, license info, insurance, etc., directly to the loan officer to save you the headache. Our goal is to make the financing as easy and painless as possible for you (after all, our focus is that you have a stress-free build experience from start to finish!).
Tips for Choosing the Right Lender
Choosing a lender for your construction loan is a big decision. Not all banks or credit unions are the same when it comes to new construction financing. Here are some tips (gleaned from our experience and client feedback) on selecting the right lending partner in Little Rock:
- Compare Interest Rates and Terms: Construction loan interest rates can vary between lenders. Some offer fixed rates during construction, others offer an adjustable rate that might be tied to the prime rate. Ask each lender what rate they can offer and whether it’s fixed for the term of construction. Also ask about the term (how long is the construction period before it’s due) and any option to extend if needed. Check if they charge a penalty if construction goes over schedule or if an extension fee applies. Ideally, find a lender with a competitive rate and a standard 12-month term with easy extension if necessary. Additionally, inquire about how they handle the transition to permanent financing: do they offer a one-time close? If so, what are the long-term rates and options (30-year fixed, etc.)? If not, do they offer any help or rate guarantee for the permanent loan? Some local lenders might give you a slight break on closing costs for the permanent loan if you use them for both construction and mortgage.
- Down Payment Requirements: As we covered, different lenders have different down payment (LTC) requirements. If you are trying to minimize upfront cash, you’ll want a lender that allows a higher loan-to-cost (like 85% or even 90%). Larger banks or those with special programs (like certain nationwide one-time close loans) might accommodate lower down payments, whereas many local banks stick to 20% down. For example, if you qualify for a VA one-time-close, you might go with a lender that offers that so you can utilize your VA benefit (0% down)
. Or if you have only 10% to put down, look for a lender that specifically says they’ll do 90% financing. Always be sure to mention your land equity as well; some lenders who advertise “20% down” will county land equity in that. So you might find that you effectively have 20% covered by your land and thus their requirement is satisfied. - Experience with Construction Loans: This is huge. You want a lender (and specifically a loan officer) who has experience handling construction loans regularly, not as a one-off. Construction loans have more moving parts (draws, inspections, builder interactions) than normal mortgages. An inexperienced lender might fumble the draw process or cause delays. When interviewing lenders, ask how often they do construction loans and if they have a dedicated department for it. In Little Rock, many of the community banks have specialists for this. You might even get recommendations from friends or your builder (we can certainly recommend loan officers we work well with). An experienced construction lender will clearly explain the process to you, set up realistic draw schedules, and have efficient systems for inspections and fund disbursement. They can also better anticipate any hiccups and solve them. A good question to ask: “Will the same person/team handling my construction loan also handle converting it to a mortgage, or will I be handed off?” Some places, like Arvest, keep it all in one place (they service the loan themselves)
. Others might originate the construction loan then sell the final mortgage to a larger servicer. Either way can work, but knowing the chain of custody for your loan is helpful. - Fees and Closing Costs: Construction loans often have some extra fees. For instance, many charge an inspection fee for each draw (to cover the cost of sending an inspector). There can also be a fee to set up the construction loan in addition to normal closing costs. Ask lenders for a loan estimate or a breakdown of their fees. Some might charge, say, $100 per inspection, others $0 because it’s built into their rate. Also compare standard fees like origination or points, underwriting fees, etc. If one lender’s costs are significantly higher, ask them why – sometimes higher fees come with a lower interest rate or vice versa. Also, if you’re doing a one-time close, compare the total costs versus doing two separate loans. While a one-time close saves a second set of closing costs, the initial closing might be slightly higher due to the longer lock and additional paperwork for the modification. It’s worth doing the math. The good news: in our region, many local lenders keep fees reasonable to stay competitive. Don’t be shy about negotiating either – if you prefer Lender A but Lender B offers lower fees, mention it; they might match or beat it to win your business.
- Lender’s Willingness to Communicate with Your Builder: This one is more subtle, but in our experience, a collaborative lender can make for a much better building experience. Ideally, you want a loan officer who is happy to talk with your builder, coordinate, draw paperwork, and maybe even come visit the site once or twice. That shows they are engaged. When we have a lender who picks up the phone when we call and resolves little issues quickly, it keeps everything on schedule. On the flip side, if a lender is unresponsive or very rigid, it could slow down funds (which could potentially delay construction). During your vetting, you might gauge this by how responsive they are to your questions and how knowledgeable they sound. You can also ask your builder if they’ve worked with that lender before. Silver Field has worked with most of the major banks in Little Rock and can usually tell you, “Yes, they’re great” or “Our other client had some slow draw experiences with them.” That insight is valuable. We won’t push you to any particular bank, but we will share our experiences candidly so you can make an informed choice.
- Special Programs or Perks: Finally, see if any lenders offer special programs that fit your profile. For instance, some banks have programs for first-time home builders, or for certain professions (sometimes doctors or other professionals get special mortgage consideration which might extend to construction loans). Centennial Bank’s affinity program we mentioned is one example where working with an approved builder could net you some closing cost savings
. Another example: if you already bank with someone (say you have significant deposits at a certain bank), they might waive some fees or give a slight rate discount for doing the construction loan with them. It never hurts to ask. Also, ensure the lender you choose is comfortable with the type of home you’re building – almost all are fine with a standard single-family house. But if you were doing something unusual (like a log home or a barndominium), some lenders would shy away. For a typical custom home Little Rock, you won’t have that issue. Just be aware if you consider an alternative structure.
In essence, do your homework and shop around. We usually suggest talking to at least two lenders, if not three, to compare offers. The lowest rate isn’t everything – consider service and expertise. The construction loan will be your financial lifeline through the build, so you want a lender who is a true partner in the process. Silver Field Construction is happy to provide a short-list of trusted lenders if you’re starting from scratch. We don’t get any kickbacks or anything; it’s purely about making sure our clients have a smooth ride. Our ultimate goal is the same as yours: get the financing in place so we can build your dream home with no delays.
Silver Field Construction: Your Partner in Custom Home Financing
At Silver Field Construction, building custom homes is not just our job – it’s our passion. We firmly believe that the journey of building your dream home should be as enjoyable and stress-free as the day you move in, and that extends to the financing process. As a local Little Rock home builder, we take a very hands-on, supportive role in guiding our clients through construction loan financing. Here are a few ways we make the process easier and bring value to you as you secure a construction loan:
- Early Guidance and Budgeting: Long before any loan papers are signed, we work with you to establish a realistic construction budget for the home you want. We discuss your “wish list” and design preferences, and provide ballpark cost estimates so you know what price range to aim for. This helps you go to lenders with a clear idea of how much you need to borrow. We can even join you in meetings with your lender (if you’d like) to answer build-related questions. Our experience in the Little Rock construction market means we can quickly ballpark costs for custom features, which ensures the loan amount requested is sufficient (but not excessive). Nothing’s worse than getting a loan approval and then finding out the house you planned is 10% over that budget. We strive to prevent that through careful planning and open communication. If needed, we adjust the scope or suggest design modifications to fit your target budget before you finalize the loan. This way, you head into financing with confidence that your loan will cover the project.
- Loan Paperwork Assistance: As outlined in the previous section, there’s a mountain of paperwork needed for a construction loan. We help shoulder that load. We provide the lender everything about the project: plans, detailed cost breakdown, construction contract, proof of our insurance and license, a build schedule, etc. We respond promptly to any lender inquiries about the project. For example, if the bank’s appraiser has questions about the materials or quality level, we’ll supply whatever info is needed to support a strong appraisal. When you work with Silver Field, you’re not left alone to “figure it out” with the bank – we’re right there with you. Our team has even coordinated directly with appraisers to ensure they understand the value of certain custom features (like energy-efficient upgrades or high-end finishes) so that you get full credit in the appraised value. This collaborative approach can be the difference in getting your loan approved smoothly. We consider the lender as part of the project team and treat them with the same level of attention as we do our architects, engineers, and clients. Our goal is to have the financing process feel seamless from your perspective.
- Proven On-Time, On-Budget Performance: Financing institutions love builders who deliver on time and on budget – and that’s exactly what Silver Field Construction is known for. We have an unwavering commitment to completing projects on schedule and within the agreed budget, as our clients can attest. Why does this matter for you? Because when your builder sticks to the plan, your loan stays on track. You won’t be blindsided by cost overruns that could leave you scrambling for extra funds. We plan meticulously and provide transparent pricing, so the price we build for is the price we quoted
. Also, by finishing on time (or even early), we help you avoid additional interest payments or extension fees that can come if a project drags past the loan term. We coordinate all the moving parts (subcontractors, inspections, etc.) to prevent delays. Our mantra is “on-time and on-budget” , which aligns perfectly with keeping your construction loan in good standing. Lenders have confidence in projects we undertake, because they know our reputation for efficiency. Some local loan officers have even told clients, “Oh, you’re building with Silver Field? Great, they always run a tight ship.” That trust can sometimes translate into a smoother approval or at least less scrutiny on draw requests. - Handling the Draw Process and Beyond: Throughout construction, we manage the draw requests with professionalism. We schedule inspections promptly and ensure that each draw request is fully justified with work in place. From your perspective, we’ll let you know when we’re requesting a draw and what it’s for, and if any action is needed on your part (some banks have you sign a form). We keep a close eye on the budget through each stage and will alert you and the lender immediately if we foresee any issues. However, our planning usually prevents any budget issues to begin with. After the home is complete, we assist with the wrap-up for the loan conversion or final mortgage. We provide lien releases from all suppliers/subcontractors (proving everyone’s been paid – a requirement for the bank). We also do a final walk-through with you to ensure everything is perfect. And of course, we hand over all warranty information. We include a builder’s warranty on our homes (typically a one-year comprehensive warranty plus manufacturer warranties on products, and a structural warranty if applicable). This warranty gives you peace of mind and can be a selling point with lenders too, as it shows the home is backed by our commitment to quality.
- Commitment to a Stress-Free Experience: Financing a build can be one of the most stressful parts of the custom home process – but it doesn’t have to be. Silver Field’s team is dedicated to making it stress-free for you
. We do that by educating you upfront, handling as much of the process as possible, and keeping transparent communication. If you ever have questions or concerns, we are here to answer them. We don’t disappear after signing the contract; we’re your partner and advocate through the entire build and financing journey. Our clients often tell us that we made a complex process feel easy. That is the best compliment we could get. We want you to actually enjoy watching your home being built, rather than being bogged down by loan details. So we take the heavy lifting on our shoulders. After all, this should be an exciting time for you – you’re building your dream home! Our job is to handle the tough stuff behind the scenes and let you focus on the fun parts (like picking out finishes and imagining life in your new custom home).
In short, Silver Field Construction is more than just your home builder – we’re your guide and ally in the financing phase as well. By choosing us, you gain a partner who understands both construction and finance, and how they intertwine in a custom build. We measure our success not just by the beautiful homes we build, but by the smiles on our clients’ faces throughout the process. From groundbreaking to move-in day, we’ve got your back.
Conclusion
Embarking on a custom home build in Little Rock is a significant endeavor, but with the right knowledge and the right team, it can be one of the most rewarding experiences of your life. Understanding how construction loans and construction-to-permanent loans work is an important first step. We hope this guide has demystified the process – covering everything from local lender options and typical down payments to draw schedules and the final mortgage conversion. Remember, plenty of families in Arkansas successfully use these loans every year to create their dream homes. With solid preparation and a supportive builder, you can too.
Silver Field Construction is here to make sure your custom home project is a success from start to finish. We take pride in not only building quality homes on-time and on-budget, but also in educating and assisting our clients at every turn. Financing is no exception – we help our clients navigate construction financing so it feels manageable and clear. When you work with us, you’re never alone in the process. Our mission is to deliver a beautiful new home and a happy homeowner.
If you’re ready to take the next step toward building your custom home in Little Rock, or if you have any questions about construction loans in the area, reach out to Silver Field Construction. We’re always here to help answer questions and guide you through the exciting journey of custom home building. Together, let’s turn your dream home into a reality – with a financing plan that suits your needs and a builder committed to your peace of mind every step of the way. Here’s to building your future, right here in Little Rock!
FAQs
Q1. What is a construction loan and how does it work?
A construction loan is a short-term, interest-only loan used to finance the building of a custom home. Funds are released in stages as construction progresses.
Q2. What is the difference between a construction loan and a construction-to-permanent loan?
A construction loan is paid off or refinanced into a mortgage after the build. A construction-to-permanent loan automatically converts into a mortgage after the home is completed.
Q3. Can I use my land as a down payment in Little Rock?
Yes. Most local lenders allow the appraised value of your land to be used as part or all of your down payment.
Q4. What credit score is needed for a construction loan in Arkansas?
Most lenders require a minimum credit score of 680, though some government-backed loans may accept lower scores.
Q5. What documents are needed for a construction loan?
You’ll typically need building plans, a construction contract, a timeline, and personal financial documents like pay stubs and tax returns.
Q6. Do I make payments during construction?
Yes. During construction, you make interest-only payments on the amount drawn from the loan.
Q7. Does Silver Field Construction help with the loan process?
Absolutely. We assist clients with documentation, timelines, draw coordination, and communication with lenders to ensure a smooth process.
