Construction loans

What is a construction loan?

Construction financing helps pay for building a home. Funds are commonly released in stages, called draws, as work progresses. The lender reviews the project as well as the borrower. A standard purchase mortgage is a different transaction.

One closing or two?

A construction-to-permanent arrangement connects the building phase with a long-term mortgage. A single-closing structure combines them in one transaction. A two-closing structure uses separate construction and permanent loans.

Ask how interest, payments, rate locks, completion deadlines, and any requalification work. One closing does not automatically mean the lowest total cost, and program availability varies.

Who may qualify, and what is required?

• Documented income, acceptable credit, debts, reserves, and available funds.
• Eligible land, title, plans, specifications, permits, and an approved builder.
• A signed construction contract, budget, schedule, and contingency for overruns.
• An appraisal based on the completed project and required inspections.

Down payment requirements depend on the program and project. Existing land equity may count when the lender permits it. We will confirm how the land is valued and what additional cash is needed.

Questions to ask before signing a building contract

Who pays if costs exceed the budget? How are draws approved? What happens if construction runs late? What insurance is required? When do payments begin and what changes when the permanent mortgage starts?

Bring your land details, builder proposal, estimated cost, and timeline. If you are improving an existing property, compare renovation financing as well.

References and related guides

• CFPB: construction loans ↗
• Fannie Mae: construction-to-permanent financing ↗

External guidance describes specific programs or general requirements; it does not confirm availability through our team. Reviewed October 20, 2026.

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