Securing the best financing terms for new construction in Colorado Springs requires comparing multiple local lenders, understanding loan types like one-time close versus two-time close, and leveraging Colorado-specific resources. Building a home from the ground up is an exciting prospect, especially with new developments flourishing in communities like Briargate, Flying Horse, and Cordera. However, financing new construction is fundamentally different and more complex than securing a traditional mortgage for an existing home. In this blog post, Colorado Springs real estate expert Barb Schlinker discusses how to secure the best financing terms for new construction in Colorado Springs.

Key Takeaways

• Compare multiple Colorado Springs construction lenders as their rates, loan-to-value (LTV) ratios, and draw fee structures can vary significantly among local banks and credit unions
• Understand loan type implications because one-time close construction-to-permanent loans often save time and closing costs compared to two-time close options
• Leverage military benefits if eligible because VA construction loans provide a zero-down payment opportunity for families stationed at Peterson Space Force Base and Fort Carson
• Factor in neighborhood-specific costs since builds in areas like Flying Horse or Briargate may require higher loan amounts than in Fountain due to lot premiums and utility fees

Navigating construction loans involves understanding draw schedules, builder approvals, and unique loan products that are not always offered by every lender. Choosing the right financing can save you thousands of dollars over the life of the loan and prevent costly delays during the building process. By focusing on key factors like interest rates, loan-to-value ratios, and a lender’s experience with local builders, you can ensure a smooth and financially sound building experience.

To Discuss Your Home Sale or Purchase, Call or Text Today and Start Packing!

As a Navy veteran who served in intelligence, Barb Schlinker brings disciplined financial planning expertise to new construction financing guidance. With over 25 years of experience helping families navigate complex construction loans in the Colorado Springs real estate market, Barb understands how to match buyers with the right lenders and loan products. Her team has successfully guided hundreds of clients through the construction financing process, working with local lenders to secure competitive terms that save buyers thousands of dollars over the life of their loans.

What Are the Typical Interest Rates for Construction Loans in Colorado Springs?

When budgeting for a new build, it’s important to understand that construction loan interest rates in Colorado Springs are typically 0.5% to 1.0% higher than traditional mortgage rates. This premium reflects the increased risk lenders take on during the construction phase before the home is a completed, tangible asset. The final rate you secure depends heavily on several factors, including your credit score, the size of your down payment, and the type of rate structure you choose.

Lenders in El Paso County generally offer the most competitive rates to borrowers with credit scores of 740 or higher and a down payment of at least 20-25%. While it’s possible to secure financing with a lower score or smaller down payment, the interest rate will likely be higher. Additionally, borrowers must choose between a fixed-rate loan, where the interest rate is locked for the life of the loan, or a variable-rate loan, which may fluctuate based on market conditions.

How Credit Score Affects Your Construction Loan Rate

Your credit score is a primary driver of your interest rate. A higher score signals to lenders that you are a lower-risk borrower, which translates into better financing terms. Understanding where you fall on the credit spectrum helps you prepare for realistic expectations when shopping for construction loans in the Pikes Peak region.

• 740+ (Excellent Credit): You will likely qualify for the best available rates and most favorable loan terms
• 700-739 (Good Credit): You can expect to secure competitive rates, though they may be slightly higher than the top tier
• 680-699 (Fair Credit): You can still qualify for a construction loan, but lenders may require a larger down payment or charge a higher interest rate to offset their risk
• Below 680: Securing a construction loan becomes more challenging and will require working with a specialized lender

Fixed vs. Variable Rate Considerations

Choosing between a fixed or variable rate depends on your risk tolerance and the projected building timeline. Given that new construction in Colorado can sometimes face weather delays, especially in mountain communities like Woodland Park, a fixed rate can provide valuable peace of mind.

A fixed rate locks in your interest rate at closing, protecting you from potential market increases during the 9-18 month construction period. In contrast, a variable rate may start lower but can rise during construction, increasing your future mortgage payment. For most buyers buying a house in Colorado Springs through new construction, the stability of a fixed rate outweighs the initial savings of a variable rate.

Understanding One-Time Close vs. Two-Time Close Construction Loans

When seeking financing for a new home you plan to build, you will encounter two primary loan structures: one-time close and two-time close. The choice between them significantly impacts your closing costs, exposure to interest rate risk, and overall administrative burden. Many local lenders in the Pikes Peak region, including NBH Bank and Ent Credit Union, often favor the one-time close model for its efficiency and buyer protection.

A one-time close loan, also known as a construction-to-permanent loan, combines the construction financing and the permanent mortgage into a single transaction. This means you go through one application and one closing process, paying only one set of closing costs. More importantly, your interest rate is locked in before construction begins, which protects you from market fluctuations. The loan automatically converts to a standard mortgage once your home is complete and passes final inspection.

In contrast, a two-time close loan involves two separate transactions. The first is for the short-term construction loan, and the second is for the permanent mortgage once the home is built. This structure requires two applications, two credit checks, and two sets of closing costs. The primary risk is that if interest rates rise during construction, you will be subject to the higher rate on your permanent mortgage, potentially costing you thousands of dollars over the loan’s lifetime.

“Many buyers are drawn to the simplicity and security of a one-time close loan. Locking in your interest rate upfront eliminates a major source of financial uncertainty, which is incredibly valuable during a long building process. I’ve seen buyers save tens of thousands over their loan term by avoiding the second closing in a rising rate environment.” – Barb Schlinker

Working with a real estate agency in Colorado Springs that understands construction financing nuances ensures you select the loan structure that best fits your financial goals and timeline.

VA Construction Loans for Military Families in Colorado Springs

Colorado Springs is a major military hub, home to Peterson Space Force Base, Fort Carson, and the U.S. Air Force Academy. This creates a significant demand for VA construction loans, a powerful benefit for eligible military families. A VA one-time close construction loan allows qualifying service members, veterans, and surviving spouses to build a new home with zero down payment. This is a massive advantage compared to the 20-25% down payment required for most conventional construction loans.

However, securing a VA construction loan requires working with a specialized lender experienced in this specific product. Not all lenders offer them, and the process involves verifying builder eligibility and meeting specific VA requirements. Obtaining your Certificate of Eligibility (COE) is the first step, followed by finding a lender and builder who are both comfortable with the VA construction loan process.

The benefits of VA construction loans for military families are substantial:

• Zero down payment requirement, preserving capital for furnishings and moving expenses
• No private mortgage insurance (PMI) regardless of down payment amount
• Competitive interest rates often lower than conventional construction loans
• Seller concessions allowed up to 4% of the loan amount to cover closing costs
• Flexible credit requirements with many lenders accepting scores as low as 620

As a Navy veteran, Barb Schlinker and her team have a unique understanding of the needs of military families. They can connect you with lenders who specialize in VA construction loans and guide you through the process, helping you build a home in communities like Security-Widefield near Fort Carson or Monument with convenient access to the Air Force Academy. The team’s military background creates an instant understanding of PCS timelines, BAH considerations, and the unique stresses military families face during relocation.

Best Financing Terms: How Long Does It Take to Get Approved for a Construction Loan?

The approval process for a construction loan in Colorado Springs is more detailed than for a standard mortgage and typically takes 30 to 45 days. This timeline can vary based on the lender’s current volume, the complexity of your financial situation, and the completeness of your application. The process is generally broken down into three distinct phases that require careful attention and preparation.

The first phase is pre-approval, which takes about one to two weeks. During this stage, the lender conducts a thorough review of your finances, including your credit report, income, employment history, and debt-to-income ratio. This initial assessment helps determine your borrowing capacity and gives you a clear budget for your construction project.

The second phase involves the builder and plan review, which can take another two to three weeks. The lender must vet your chosen builder’s credentials, including their license, insurance, and financial stability. They also review detailed construction blueprints and a line-item budget to ensure the project is viable. Some lenders maintain approved builder lists, which can expedite this process significantly.

Finally, the loan moves to final approval and closing, which takes one to two weeks. This involves title work, final underwriting, and coordinating the closing. To avoid delays and ensure a smooth approval process, it is best to have all your necessary documents prepared in advance:

• Tax returns and W-2s for the last two years
• Recent pay stubs covering at least 30 days
• Bank statements for all accounts (last 60 days)
• A signed construction contract with your builder
• Detailed building plans and specifications
• A comprehensive line-item project budget
• Proof of land ownership or purchase contract
• Builder’s license, insurance, and references

“The biggest delays I see in construction loan approvals happen when buyers haven’t selected their builder yet or don’t have a detailed budget. Lenders need specifics, not estimates. Having complete documentation up front can cut approval time in half.” – Barb Schlinker

How Your Colorado Springs Neighborhood Choice Affects Financing Needs

The neighborhood where you choose to build in the Colorado Springs area significantly impacts your total project cost and, therefore, your financing needs. Costs can vary dramatically due to factors like lot prices, utility connection fees, soil conditions, and development restrictions. A savvy buyer works with the top realtor in Colorado Springs to factor these differences into their budget from the start to avoid shortfalls that can derail construction mid-project.

For example, building in premium communities like Flying Horse or the Broadmoor often involves higher lot costs and strict architectural guidelines that increase the total loan amount needed. Flying Horse lots can range from $150,000 to $500,000 or more, depending on views and location within the community. In contrast, building in more affordable areas like Fountain or Peyton may offer lower land prices starting around $50,000 to $100,000 for comparable lot sizes.

Additionally, factors like expansive clay soil, common in some parts of El Paso County, can require costly foundation upgrades that must be included in your construction budget. Soil mitigation can add $10,000 to $30,000 or more to your project cost. When evaluating Colorado Springs homes for sale or lots for new construction, understanding these hidden costs is essential.

Lot Premium Factors That Increase Your Loan Amount

When selecting a lot for your new home, certain features add significant value and increase the price, requiring a higher loan amount. These premium features enhance your quality of life but must be factored into your financing strategy from the beginning. Be prepared to finance more for lots with:

• Unobstructed mountain views of Pikes Peak, Garden of the Gods, or the Front Range
• Golf course frontage in communities like Flying Horse or The Broadmoor
• Cul-de-sac placement for reduced traffic, increased privacy, and enhanced safety for children
• Larger acreage, especially in areas like Black Forest where 2.5 to 5-acre lots command premiums
• Walkout basement potential on sloped lots that maximize square footage and views
• Proximity to trails and parks in master-planned communities like Cordera

Understanding Development Fees and Utility Connection Costs

Beyond the lot purchase price, new construction in Colorado Springs involves substantial development fees that must be included in your loan amount. These costs vary significantly by location and can impact your total financing needs by $15,000 to $50,000 or more.

Colorado Springs Utilities charges connection fees for water, sewer, electric, and gas service that vary based on your location and lot size. In some newer developments, these fees are partially pre-paid by the developer, while in raw land situations, you may be responsible for the full amount. Fountain and Pueblo West have different utility providers with their own fee structures, making it essential to research costs specific to your chosen community.

Additionally, metro district fees in newer communities like Banning Lewis Ranch or Wolf Ranch can add ongoing obligations that lenders consider in your debt-to-income ratio calculations. Understanding these costs upfront with help from an experienced real estate agency in Colorado Springs ensures your loan amount covers all necessary expenses.

Why Choose Barb Schlinker to Guide Your New Construction Financing

Navigating the complexities of new construction financing requires an experienced advocate on your side who understands both the real estate market and the lending landscape. As a Navy veteran, Barb Schlinker brings a level of discipline, strategic planning, and attention to detail to the process that is unmatched in the Colorado Springs real estate market. Her military background instills a commitment to mission success that translates directly into protecting her clients’ interests throughout the construction financing journey.

The team at Your Home Sold Guaranteed Realty - Barb Has the Buyers Team works with a network of trusted local lenders, including VA construction loan specialists, to help you find the best financing terms for your specific project. They have established relationships with construction loan officers at major lenders like NBH Bank, Ent Credit Union, and Capital Home Mortgage, giving clients access to competitive rates and expedited approvals. This network advantage often results in faster closings and better terms than buyers could secure on their own.

With over two decades of experience in the Colorado Springs market, Barb’s team understands the nuances of building in different neighborhoods, from the luxury estates in Monument to family homes in Banning Lewis Ranch. They have helped hundreds of clients successfully finance their dream homes, providing guidance that protects buyers and ensures a smooth process from groundbreaking to closing. The team’s expertise includes coordinating with builders, reviewing construction budgets for accuracy, and troubleshooting issues before they become costly problems.

With hundreds of 5 Star Google reviews, the team’s commitment to excellence is evident. Clients consistently praise Barb’s proactive communication, financial acumen, and ability to negotiate favorable terms. The team’s unique guarantees, including the Guaranteed Sale Program for clients who need to sell before building, provide peace of mind throughout the construction process.

Whether you’re a military family using VA benefits or a civilian buyer navigating conventional construction loans, the Barb Has the Buyers Team provides the expertise and advocacy you need. Their comprehensive knowledge of how to sell a house in Colorado and purchase new construction creates a seamless transition for clients building after selling their current homes.

To Discuss Your Home Sale or Purchase, Call or Text Today and Start Packing! 719-301-1802

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Tune in to Barb Schlinker’s weekly radio show, “Your Real Estate Voice,” airing Saturdays from 12-1pm on KVOR AM 740, KNUS AM 710, and AM 990 Talk for the latest Colorado Springs real estate insights. You can also listen to our podcast for exclusive content and expert guidance. Connect with us on YouTube, Facebook, Instagram, LinkedIn, Pinterest, and TikTok for video tours and market updates.