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I’m an associate at a firm in Houston and used JD Mortgage thanks to your advice! The experience was great—they were super fast and responsive.” —Mary Kate Raffetto Beck Redden LLP

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5 Best Construction Loans in New Jersey

Key Terms

Construction loans are short-term loans that are used to fund the construction of a new building or renovation of an existing one. They are typically offered by banks and other financial institutions.
In New Jersey, construction loans are available for a variety of property types, including single-family homes, multi-unit residential buildings, commercial buildings, and more.
When applying for a construction loan, borrowers will typically need to provide detailed plans for the project, including a budget and timeline, as well as information about their credit score and financial history. Lenders will also require an appraisal and inspection of the property to ensure that it is a good investment.

New Jersey is known as one of the original 13 colonies and is famous for its Jersey Shore and close proximity to New York City, which is responsible for much of the economic activity of the state.

As would be expected of a state with rising population growth, home prices have skyrocketed 30 percent in the last two years. The median New Jersey single-family home in January 2022 was $551,028, according to New Jersey Realtors Association. A lack of inventory is expected to keep home prices from dropping.

With the increasing demand for real estate and rising prices across New Jersey, people find themselves turning to construction loans to finance the building of new homes. With the prices of homes, it only makes sense to purchase a lot and build the brand new home of your dreams.

However, construction loans are different from the conventional mortgage loans typically used to purchase an existing home.

As you conduct your research, you’ll see construction loans have different rules and qualifying criteria. Before you commit to purchasing a lot and starting a construction project, you’ll want to line up a construction loan ahead of time and make sure you meet the eligibility criteria.

There are loan officers out there dedicated to specializing in construction loans. These industry experts have years of experience working with underwriters to ensure your success in obtaining a loan. They’ll help you navigate the application process, gain pre-approval, and close on the home.

If you’re looking for a construction lending specialist, we can quickly connect you with several options customized to your specific needs so that you can make the best decision for you.

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Benefits of a using a construction loan in New Jersey

Construction loans are a short-term financing option used to cover the cost of building a new house from start to finish. Construction loans can cover various costs associated with the process, including the costs of buying land, architect fees for draft planning, permit fees, and the labor and materials necessary to build the home.

Unlike a home loan that is secured by the home itself with home equity, construction loans are financing the cost of something that isn’t built yet – therefore it can’t be collateral. This makes the approval process for a borrower a bit more complex than a traditional mortgage. Expect your lender to want to be more involved in the process. They’ll likely want a clear understanding of the construction timeline, budget, building plans, and your personal financial situation before extending you a construction loan.

Another key difference worth noting is construction loans aren’t distributed as a lump sum. Instead, you’ll receive a series of installments from the lender as various stages of the construction are completed. The lender may require an inspection prior to fund disbursements to make sure everything is moving along as planned.

You’ll typically only be required to pay the interest on the funds as they are drawn. Principal payments won’t be required until construction is complete. At the end of construction, your lender will likely have an option for you to convert the construction loan into a traditional or permanent mortgage.

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5 Best New Jersey construction loans

1. 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, including New Jersey.

Recently we asked Wintrust Mortgage to provide us with details on their construction loan options 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 credit score of 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