Finding the Best Rural 1st Construction Loan Rates

If you’re looking to build your dream home in a rural area, securing financing can be tricky. Construction loans for rural properties come with unique challenges that most traditional banks don’t understand. That’s why it pays to work with a lender like Rural 1st that specializes in helping people build and buy homes in rural communities.

In this article we’ll explain everything you need to know about Rural 1st construction loans including current interest rates, fees, and other costs. We’ll also provide tips on how to get the best deal on your rural construction loan.

An Overview of Rural 1st Construction Loans

Rural 1st offers construction-to-permanent loans designed specifically for building a home on rural land. Here are some key features:

• Loans for conventional home builds, barndominiums, log homes, and renovation projects
• Allowed to choose your own builder
• One-time close option – no need to reapply for permanent financing
• Up to 12 months to complete construction
• Fixed and variable rate options
• Ability to lock in your rate when construction is 75% complete§
• Annual rate conversions to take advantage of market interest rate drops*

Rural 1st understands the unique challenges of rural construction. Their loan officers live and work in rural communities, so they know what it takes to build on acreage.

Rural 1st also allows you to finance up to 85% of the as-completed appraised value of your home, so you can put as little as 15% down without paying private mortgage insurance.† They factor in the equity you have in your land when determining the percentage you need to put down.

Current Rural 1st Construction Loan Rates

As a cooperative lender, Rural 1st offers very competitive interest rates on construction loans. Here are the current rate ranges as of March 2023:

Construction Loan Terms

• 12-month variable rate: 7.25% – 8.00%
• 24-month variable rate: 7.50% – 8.25%
• Fixed rate (after conversion): 7.25% – 8.25%

Rates are subject to change daily based on market conditions. The interest rate you receive will depend on your credit score, loan-to-value ratio, and other qualifications.

Rural 1st allows borrowers to convert their construction loan to a fixed rate mortgage once construction is at least 75% complete. This helps provide certainty on your long-term monthly payments.

Fees Associated with Rural 1st Construction Loans

When getting a construction loan from Rural 1st, you’ll pay some standard fees and closing costs like with any mortgage. Here are the main fees to be aware of:

• Origination fee: 1.00% of the loan amount
• Application fee: $350
• Closing costs: Expect around $6,000-$10,000 in total closing fees
• Inspections: $150 per draw inspection (typically 5-7)
• Rate lock fee: 0.5% of the loan amount if you lock your rate

Rural 1st does not charge any prepayment penalties if you pay off your construction loan early.

The unique fee to be aware of is the annual Conversion fee. If interest rates drop after you get your loan, Rural 1st allows you to refinance to a lower rate through their Conversion program for a fee of $750.* This can save you thousands in interest costs over the life of your loan.

Tips for Getting the Best Rural 1st Construction Loan Rate

Here are some tips and strategies to help you secure the lowest rate possible on a Rural 1st construction loan:

• Shop rates from multiple lenders. While Rural 1st specializes in rural lending, it can help to compare quotes from a few different lenders. This gives you negotiation leverage with Rural 1st.

• Aim for at least a 20% down payment. The more you put down, the lower your interest rate will be. Shooting for 20% down or more can significantly reduce your rate.

• Get prequalified. Getting prequalified involves a soft credit check and shows lenders you’re serious. You can lock in your rate once prequalified.

• Improve your credit score. Credit scores below 700 will cause higher rates. Take steps to improve your score before applying.

• Lower your debt-to-income ratio. Lenders look at your total monthly debts compared to income. The lower your DTI, the better your rate.

• Consider a shorter construction loan term. You may receive a lower rate with a 12-month construction loan compared to 24 months. This requires being confident you can finish building within 12 months.

• Lock your rate ASAP once construction begins. Rates fluctuate constantly. Locking in early provides rate security.

• Take advantage of rate conversions. After securing your initial loan, you can convert to lower rates in the future with Rural 1st for a small fee.*

Following these tips can potentially save you thousands of dollars in interest costs over the lifetime of your construction loan. With mortgage rates rising in 2023, it’s especially important to optimize and lock in low rates whenever possible.

The Rural 1st Application and Approval Process

Here is a quick rundown of what to expect when you apply for a construction loan with Rural 1st:

1. You’ll start by completing a simple online inquiry form with basic information.

2. A Rural 1st loan officer will reach out to discuss your building plans and financing options. They will provide a preliminary rate quote.

3. You will then complete a full loan application online and provide required documentation.

4. Rural 1st will order appraisals, title work, and other due diligence.

5. Once approved, you’ll lock your rate if you haven’t already.

6. At closing, you’ll sign loan documents and initial construction funds will be disbursed.

The entire process takes 30-45 days on average. You can track the status of your loan application through Rural 1st’s online portal. Their loan officers and support team are available by phone and email if any questions come up.

Why Choose Rural 1st for Your Construction Loan?

When it comes time to secure financing for building your rural dream home, it pays to work with a lender who understands the unique needs and challenges. Here are some of the top reasons to choose Rural 1st as your construction lender:

• Specialize in rural lending – Rural living is all they do. They know the rural property landscape.

• Local loan officers – Their team lives and works in rural areas to best serve you.

• One-time close – No need to reapply for permanent financing once home is built.

• Competitive rates – As a cooperative lender, their rates are hard to beat.

• Annual rate conversions – Automatically get lower rates when available for a small fee.*

• Smooth online process – Easy-to-use online portal to track progress.

• Fix rates early – Provides payment certainty once construction is underway.

• No prepayment penalties – Pay off early with no penalties.

For personalized guidance and financing for your rural construction project, Rural 1st has proven to be the lender of choice for many rural homebuilders. Their construction loans can save you thousands while making the building process smoother and easier.

Frequently Asked Questions

What credit score is needed for a Rural 1st construction loan?

You can generally qualify with a minimum credit score of 640, but scores of 720+ will obtain the best interest rates.

How long do I have to complete construction?

Rural 1st provides up to 12 months to complete construction. An extension of 6-12 months can be requested.

Can I lock in my interest rate?

Yes, you can lock in a fixed rate once your project is 75% complete. It’s recommended to lock in ASAP to avoid rate hikes.

What are the draw requirements?

Draws are released after inspections at stages like foundation pour, framing, electrical, drywall, etc. 10% is held back until completion.

Does Rural 1st service all of the U.S.?

They provide construction loans in most rural areas but do have some geographic restrictions. Speak to a loan officer about your location.

Ready to Build Your Rural Dream Home?