Construction Loans
Financing to build new or renovate big, with funds released as the work gets done.
Construction financing pays for a home that does not exist yet, or for a renovation large enough that a standard purchase loan will not work. Instead of one lump sum at closing, funds are released to the builder in draws as milestones are completed.
The two common structures are a one time close, which converts to permanent financing when the home is finished, and a two step approach, where a short term construction loan is refinanced at completion.
How the draw process works
Your builder submits a budget and schedule up front. As each phase finishes, an inspection confirms the work and the corresponding draw is released. You typically pay interest only on the funds drawn so far, which keeps the payment low early in the build.
- Lot equity often counts toward your down payment
- A contingency reserve is built into the budget
- Change orders are reviewed before they are funded
Choosing your builder
The builder is underwritten alongside you. We look at licensing, insurance, references, and completed projects. Having your builder packet ready early is the fastest way to keep the timeline moving.
Costs to plan for
Budget for plans and permits, the appraisal based on plans and specs, inspection fees for each draw, and interest carried during construction. Plan a cushion for change orders and material cost swings.
Documents to gather
Construction files require the standard income and asset package plus the project package.
- Full plans, specifications, and line item budget
- Signed builder contract and construction schedule
- Builder license, insurance, and references
- Lot deed or purchase contract
- Standard income and asset documentation
Advantages
- Build exactly what you want
- Interest generally paid only on funds drawn
- One time close options avoid a second set of closing costs
- Lot equity can serve as your down payment
Things to consider
- More documentation and a longer approval timeline
- Budget overruns are your responsibility
- Rate protection during the build varies by program
- Draw inspections add steps to the schedule
Common questions
Can I be my own general contractor?
Most programs require a licensed general contractor. Owner builder options are rare and reviewed case by case.
When do payments start?
Interest payments generally begin once the first draw is funded, and the full payment begins after the loan converts to permanent financing.
What happens if the build runs over budget?
Change orders and overages usually come from your contingency reserve or out of pocket, which is why we set the budget carefully at the start.
Program disclaimers
- * Higher interest rates apply
- ** For a 30-year, fixed-rate loan
- Program details are informational only and are not an offer for extension of credit or a commitment to lend. Terms are subject to change without notice.
Ready to explore Construction financing?
Start a conversation with a licensed loan officer, or begin your application whenever you're ready.