Want to learn more about EECU Construction Loans? Browse a list of common questions and answers below. We're dedicated to making the construction process as smooth as possible, so please call if you have any questions.

Remember, EECU does not provide legal advice. We strongly recommend that you review all legal documents with your attorney

Choosing a Contractor for your Construction Loan

How do I find a good contractor?

Choosing a good contractor requires research, references, and reliability to ensure that your construction loan will be a great investment that will pay off for you in the future.

What should be included in the contract?

The contract must have full identification of all parties (contractor, owner, and subcontractors), and must be signed by borrower and the contractor. A good rule of thumb is that the contract should not contain verbiage such as bid, estimate, quote, pricing, or scope of work or subject to change.

The contract should have a set price for the work to be done/improvements and a clear statement of the responsibilities each party will perform. The contract will specify all work being done with draw schedule or a line-item cost breakdown according to specs and plans. Contract should have provisions for any possible changes to plans or specifications by appropriate change orders. Price on contract as stated and anything over requested loan amount must be paid out of pocket prior to first draw disbursement. The Contractor may have sub-contractors and must list all sub-contractors with phone numbers on contract.

Can I use a family member to build my home if they are a builder or subcontractor? Or can I build the home or complete any finish work?

EECU does not allow family members to build or perform any of the work. EECU requires the contractor to be a disinterested party. You cannot perform the work yourself or by anyone who has interest in your property.

Builder Approval Process

What is the Builder Approval Process?

The Builder Approval Process is an important step to obtaining your construction to permanent mortgage. If your builder is new to EECU, they will need to complete a Builder Application and provide required documents. The Contractor name and address must match Secretary of State or have Assumed Name Certificate. We will request a list of authorized signers on behalf of the company. The Contractor must be in good standing with Texas Comptroller of Public Accounts. Copy of licenses, proof of insurance and articles of organization should be proved.

Why does EECU need to approve the builder?

EECU verifies that the builder has the experience to complete the project on time and within budget. The builder must be experienced, insured, and licensed.

How soon will we know if the builder was approved by EECU?

The MLO (Mortgage Loan Officer) will notify the builder with 7-10 days after full loan file submission with supporting documents if their application has been approved or denied.

Construction Loan Terms

How long do I have to build our dream home?

The length of time to complete construction of the home is 12 months. The 12 months begins once the construction loan funds.

What is the construction one-time close process?

The first step is to apply for the one-time close construction loan to ensure qualification. Once you have been pre-approved, you will want to determine your builder. The builder will need to complete EECU’s builder approval process.

Once the builder is approved, we will request a copy of the contract, plans and specs. An appraisal will be ordered.

Upon approval of the loan, EECU will contact you to schedule the signing of the one-time construction loan papers.

The builder cannot start construction of your home until after your loan has closed. The mortgage must be recorded, and a notice of commencement filed before any work can start. The start of construction prior to our notification may result in the cancellation of the loan commitment.

You will receive the contact list of how to request your first draw after closing, interim draws, and the final construction draw upon closing.

All Property Owners, and the Contractor /Authorized Signer must be present at loan closing to sign applicable documents.

10% retainage 30 days after completion of improvements optional and recommended on construction loans.

All funded draws must match contract price, and the final draw must be at completion.

What if my home is not built in 12 months?

If the project runs longer than anticipated, your builder will need to provide EECU with a written reason for the delay and an estimated completion date.

What if my home is built in less than 12 months?

If the project is completed early, you have 60 days to convert your loan to principal and interest payments. This is a very easy process, just notify EECU and we will complete the process.

What are the required documents from the builder?

If deposits have been given to the builder this should be accounted for in the “Already Paid” column of the builders sworn statement and reduce the total of the “Balance to Complete” column.

EECU requires plans and specifications of the house to be build. Builders Risk Insurance will be required and must be in place during construction to insure the project against hazards such as fire, vandalism, and theft. Upon completion of the home, a homeowner’s insurance policy must replace the Builder’s Risk Insurance.

What is the Borrower Draw Authorization Disclosure?

This form will need to be signed by both parties, the builder, and the borrower. This will authorize your builder to receive construction draws without further consent, or to require consent from you for each draw that is disbursed.

What is the draw process?

After the loan closing, a representative from the Closing Department will contact you within 48 hours of the loan funding.

You will be assigned a Construction Coordinator as your primary contact for both you and your builder throughout the construction process. The Construction Coordinator will provide their contact information.

During the construction phase, you or your builder may request up to ten construction draws by contacting your Construction Coordinator directly or by emailing.

Once the draw request is received, the Construction Coordinator will order all the required documents to process the draw. The following must be received and reviewed before a draw is disbursed:

  • A Construction Loan Draw Authorization form will be provided to you and require your signature, and your Contractor’s authorizing each disbursement.
  • A form board survey must be performed by a licensed land surveyor, before the first draw and after the loan has closed.
  • Property tax bills that have been issued will be reported on the Title Endorsement. You are responsible for payment of your property taxes once the bill is issued and appears. EECU does not escrow for taxes or insurance during the construction period. Payment is your responsibility.
  • An inspection will be ordered from the company that competed the original appraisal of your construction project. The inspection reports include photos and reports the work that has been completed at the time of inspection.
  • A final inspection indicating that the home was built according to plans and specifications and that the value has not declined is required before the final draw is released.
The final draw will be released after the required documents have been received.

Construction and Permanent Loan Payments

When will my construction payments be due?

During the construction term, payments are interest-only calculated on the outstanding balance of the loan. Payments are due by the 1st of each month.

Payments during the construction term of the loan cannot be automatically deducted from your account. You must make your interest-only payment directly through the website, a branch, or by mail.

If you have signed up for ACH, automatic deduction will not begin until the construction is complete, and you begin principal and interest payments. Payment statements will be issued during the construction phase of the project to make payments.

How is my construction payment calculated?

Construction payments are calculated using the amount that has been disbursed and the interest rate shown on the member’s note. A simple interest daily calculation is used as shown in this example.

Loan amount: $550,000
Amount disbursed: $150,000
Interest rate: 6.25%
Calculation: $150,000 x 0.625 = $9375/365 days x 30 days = $25.68 per day x 30-day month = $770.55

When is my payment due when my final draw and home has been completed?

Your final construction payment will be due on the 1st of the month following completion of your home and conversion to your permanent loan. Your first permanent loan payment is due on the first of the following month.

Date home completed: March 5
Date Final Disbursement Sent: March 12
Conversion Date: March 31
Final Construction Loan Payment Due Date: April 25
First Permanent Loan Payment Due Date: May 1

How does EECU bill for my first permanent loan payment?

You can request the statements to be mailed to you, sign up for e-statements, or arrange for an ACH to be set up to automatically make payments. Your Construction Coordinator will discuss the options with you and assist with making payment arrangements using the best options that work for you.

Can the principal balance of my construction loan be reduced before converting to the principal and interest permanent payment?

Yes. Please notify your Construction Coordinator before your loan converts and they will assist with the principal reduction and the new payment amounts.

Conversion To Permanent Financing

What is the conversion process?

This is the process of the moving the construction loan payment to the permanent principal and interest payment.

When the builder requests the final EECU construction draw, you will be contacted by your Construction Coordinator regarding conversion. The one-time close construction permanent loan will automatically convert into a permanent mortgage and your principal and interest payments will begin. The Construction Coordinator will discuss setting up an escrow account if your loan exceeds an 80% loan to value ratio.

When should I convert to a permanent loan?

Construction loans convert to principal and interest payments based upon the original note date and the construction completed date on the Construction Loan Agreement form, provided no extensions have been granted.

Do I need to supply any documentation to convert to permanent financing?

Yes. You may need to provide some or all the following items when your loan converts to permanent payments.

  • Certificate of Occupancy
  • 100% complete letter signed by the member
  • Proof of the source of any funds paid out of pocket for project change orders
  • Proof of one-year paid Homeowner’s Insurance Policy

What documentation does EECU need prior to the first construction disbursement after closing?

  • Copy of the building permit
  • Signed, Construction Loan Draw Authorization
  • Affidavit of Commencement
  • Form Board survey
  • Proof of Builders Risk (if not received at closing)
  • Construction Progress Inspection (this is ordered by EECU Construction Coordinator)
  • Borrower’s Authorization

What documentation is needed for interim draws?

  • Signed, Construction Loan Draw Authorization
  • Lien waivers from the previous draw
  • All Bills Paid Affidavit
  • Construction Progress Inspection
  • Labor costs paid when work is complete
  • Payments made for materials on site

What documentation is required prior to the final disbursement?

  • Final signed Construction Loan Draw Authorization
  • Final Bills Paid Affidavit and Waiver of Lien
  • Affidavit of Completion
  • Lien Waivers from the previous draw
  • Certificate of Occupancy
  • Final Construction Inspection
  • 100% complete statement signed by you
  • Insurance and tax information including a paid Homeowners Insurance Policy

Taxes and Insurance


Builder’s Risk Insurance is required for the term of the construction period. Once the Certificate of Occupancy has been issued for the home, Builder’s Risk will expire, and Homeowners Insurance is to be purchased by you.

You are responsible for payment of taxes and insurance during the construction period (no escrow account is available for this purpose during the construction phase of the loan)

Before you begin making payments of the permanent mortgage, the Construction Coordinator will work with you to determine what funds need to be collected to set up an escrow account for the loan where EECU will pay taxes and insurance. An escrow analysis will be proved at this time.

Property taxes may be increased by the taxing authority based on improvements made to the property.

Who pays taxes during construction?

You pay taxes during construction based on the tax bill issued by the taxing authority.

Will my taxes increase when my home is completed?

The value of your property will increase after the construction of your home is completed. Each taxing authority is different in terms of the time it takes to make this value adjustment.

When should I obtain a homeowner’s insurance policy?

Once the construction has been completed, and the Certificate of Occupancy has been issued, you will need to obtain a standard Homeowner’s Insurance Policy. EECU will need to be added as a loss payee.

Frequently Asked Questions

What is a Construction-To-Permanent Loan?

This is a single -close loan that includes 12 months of construction financing plus up to 29 years of end financing in one loan. For example, a 30-year Construction-to-Permanent Loan with EECU includes a 12-month construction period, as well as a 29-year principal and interest period. The Construction-to-Permanent Loan has only one closing, one set of closing costs and the loan terms including the interest rate remain the same throughout the life of the loan.

Do we have to own the lot free and clear?

No, if you do not own the lot free and clear when applying for the Construction-to-Permanent Loan, EECU will pay the lot off at closing.

Do I have to sign new documents once my home is complete and I am ready to start my permanent payments?

No, the loan documents were created to cover both the constructing and permanent phase of your loan. You can be assured that you have permanent financing when you home is complete.

If we already own our lot, how do we determine how much we can borrow?

You will be able to borrow a percentage of the future value of the house, regardless of how long you’ve owned the lot or the total cost of the build. Lot equity can be used as a source of down payment as long as the appraisal value is adequate.

What does an appraiser appraise?

The appraiser uses plans and specifications provided by the builder, along with the vacant property on which the house is to be built, to determine the value of the property once construction is complete.

Can your programs be used to finance major remodels or even a “teardown”?

Yes, the amount that can be borrowed is based on the future value of the property, after the construction or remodel is complete.

Can I select any builder I want?

The builder must be on the EECU Builder Approval List. To be added, each builder is required to complete the EECU Builder Application and complete the application process.

Can I act as my own builder/general contractor?

No, EECU does not allow “self-build” construction loans.

When does the construction loan term begin?

EECU offers a 12-month Construction-to-Permanent loan program. The loan term begins on the date the note is signed.

How do payments work during the construction phase of the loan?

You will pay interest only on the principal balance disbursed when the billing is generated.

What if the appraised value is lower than expected?

In the event the value is lower than expected, you may be required to bring additional funds to close. This will depend upon the loan-to-value ratio that results once the appraised value has been determined. Your loan officer will discuss the options available to you.

Do we need to sell our current home before building a new home?

Consult with your Loan Officer to determine all your options. EECU does offer bridge loans.

What if the project costs are more than estimated?

Cost overruns can happen. All cost overruns and change orders that increase the overall cost of construction must be paid out of pocket by you.

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