Home Construction Loans FAQs

Your loan amount is determined by several factors which include but are not limited to: LTV, (Loan to Value), Debt to income ratios, credit score, and cash reserves.

LTV is limited to 80% of the appraised value.

Generally your lot needs to be paid for and its equity will serve as part or all of the down payment. However, check with your mortgage originator to see if your lot purchase can be included in the construction loan.

Typically 20% of the total value of your lot plus the construction cost. Example: Lot value is $40,000 + construction cost of $160,000 = $200,000. $200,000 x 20% = $40,000.

Yes, a general suggestion would be to have at least 20% in cash reserves. 20% of the construction costs (Example: The cost is $160,000, then the cash reserves should be $32,000)

Yes, in order to help insure that the project is staying on budget all funds are held by the bank and disbursed according to our inspection process.

Customer funds are disbursed first to keep your interest costs down. No interest is charged on funds collected from the customer.


Yes, your lot should be free from debt. However, check with your mortgage originator to see if it can be included.

Based on the balance you owe and the overall size of your project we may be able to include paying off your lot in your mortgage.

Yes, however discuss this with your mortgage originator to see how it could affect your down payment requirements.

Yes, on our fixed rate products. However, on our adjustable rate product the rate is only fixed for the initial period, currently 5 or 7 years.


Your 1st interest payment will be due on the 1st day of the second month after your closing (i.e. closing on April 30, 1st payment would be due on June 1st). Interest is calculated based on the amount of money you have drawn during the month.

Yes, you will need to provide written qualifications for us to consider this request. Examples of written qualifications could include the borrower is employed in the construction field and/or has family members who are plumbers, electricians, etc. You may also provide the example that you acted as a self-contractor on a previous home.



The appraiser will use the plans, a description of materials list, and your contract/cost estimates with your Builder to determine a market value for your project.

We require a Home Federal Bank checking account to be opened for the construction project. We will deposit construction funds into this account at your direction and in accordance with our inspection results.

We require two inspections.

  1. At the footers stage and
  2. A final inspection.

Otherwise, inspections are done on an as-needed basis.

We only inspect to monitor completed progress on your project. Our inspectors are NOT checking for quality of work or conformity to building codes.


Yes, draws can be requested as work progresses.

Our goal is to have your inspection completed within 48 hours of the request. Upon completion of the inspection the funds will be made available.

No. In order to maintain your amortization schedule your monthly amortizing payments will start on the 13th month even if your project is not completed. However, interest will continue to accrue based on the amount of funds you have drawn, not the full amount of the loan.

  1. You can draw the remaining funds after our final inspection and use as you wish, or
  2. We can reduce your loan amount and adjust your monthly payment to reflect your smaller balance.

Yes, contact our Construction Lending Department and they will advise you as to when these funds should be applied to your loan and your options for payment reduction, if desired.

Yes, immediately after closing you will need to open a Home Federal Bank checking account for the purpose of the construction project. We will deposit construction funds into this account at your direction and in accordance with our inspection results.

Next you will need to have your Builders Risk Insurance policy and foundation spotting survey forwarded to our Construction Lending Department.

Follow up with the Construction Lending Department: 865-546-0330

This will bring us to your first required inspection when your footers are ready to be inspected.

Terms and Conditions: Interest only payments for the first 12 months based on amount drawn, followed by 360 monthly payments. Example: Monthly payments of $506.69 per $100,000 borrowed. This payment does not include amounts for taxes and insurance premiums, if applicable, and the actual payment obligation will be greater. Property insurance required, including flood insurance, if applicable. Offer subject to change. Offer subject to credit and collateral approval.

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