Construction Loans

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Construction Loans: Build Your Dream Home from the Ground Up

A construction loan is the perfect financing solution for homebuyers and investors who want to build a home from scratch or complete major renovations. Unlike traditional mortgages, construction loans provide funding in stages as the project progresses, ensuring that builders and contractors get paid while work is completed.

Whether you’re looking to build your dream home, develop an investment property, or complete a major renovation, a construction loan can make it happen.

Key Benefits of Construction Loans:

✔️ Finance Land & Construction Costs Together – No need for a separate land loan.

✔️ Interest-Only Payments During Construction – Lower payments until the home is complete.

✔️ Flexible Loan Types – Conventional, FHA, VA, and Jumbo construction loan options available.

✔️ Ideal for Custom Homes & Major Renovations – Perfect for those building from scratch or significantly upgrading an existing property.

✔️ One-Time Close Options Available – Lock in permanent financing upfront to avoid multiple closings and extra fees.

Types of Construction Loans:

1. One-Time Close Construction Loans (OTC)

A One-Time Close Construction Loan eliminates the need for separate loans to finance the land purchase, construction, and permanent mortgage.

✅ One Loan, One Closing – No need for a second closing when construction is complete.

✅ Interest-Only During Construction – Lower payments while the home is being built.

✅ Automatic Transition to Permanent Loan – No need to requalify after construction is done.

✅ Available for FHA, VA, and Conventional Loans – Low down payment options available.

💡 Best for: Homebuyers who want to simplify the financing process and lock in their mortgage rate before construction begins.

2. Two-Time Close Construction Loans

A Two-Time Close Construction Loan involves two separate loans:

• First Loan: Short-term construction financing (usually 12-24 months).

• Second Loan: Permanent mortgage (refinancing into a long-term loan).

✅ More Flexibility in Loan Terms – Shop for the best permanent mortgage rate after construction.

✅ Ideal for Complex Construction Projects – Best for high-value custom homes or unique properties.

✅ Construction Loan Repayment Options – Pay off interest-only or include construction costs in final mortgage.

💡 Best for: Borrowers who want more control over their mortgage terms after construction is completed.

3. FHA Construction Loans (One-Time Close FHA Loan)

FHA Construction Loans allow low down payments and more flexible credit requirements for borrowers looking to build their primary residence.

✅ Only 3.5% Down Payment Required – Perfect for first-time buyers.

✅ Lower Credit Score Requirements – Approval with scores as low as 580.

✅ Government-Backed Loan – Great for those with limited savings or credit history.

💡 Best for: First-time homebuyers or those who need low down payment options.

4. VA Construction Loans – Build with No Down Payment

A VA Construction Loan is a fantastic option for veterans, active-duty military, and eligible spouses looking to build a home with no money down.

✅ 100% Financing Available – No down payment required.

✅ No Private Mortgage Insurance (PMI) – Save on monthly costs.

✅ Competitive Interest Rates – VA-backed loans typically offer lower rates.

💡 Best for: Veterans and military personnel who want to build their home without a down payment.

5. Jumbo Construction Loans (For High-Value Homes)

If you’re building a luxury home or high-value property, a Jumbo Construction Loan allows for higher loan amounts that exceed conventional lending limits.

✅ Loans Over $726,200 (May Vary by Location)

✅ Flexible Loan Terms & Interest-Only Payments

✅ Competitive Rates for Well-Qualified Borrowers

💡 Best for: Homebuyers building high-value custom homes or luxury properties.

Who Can Benefit from a Construction Loan?

🏡 First-Time Homebuyers – Build your dream home with as little as 3.5% down.

🏡 Veterans & Active Military – Take advantage of zero down payment VA loans.

🏡 Investors & Developers – Fund multi-unit projects or rental properties.

🏡 Homeowners Looking to Upgrade – Finance major renovations or home expansions.

🏡 Self-Builders – Those managing their own construction project (some lenders allow this).

How Construction Loans Work: The Process Step-by-Step

1️⃣ Pre-Approval & Loan Application – Get pre-approved for a construction loan to determine budget and eligibility.

2️⃣ Choose a Builder & Submit Plans – Lender reviews the builder’s experience, licenses, and project details.

3️⃣ Loan Closing & Initial Disbursement – First funds are released to start construction (land purchase or foundation work).

4️⃣ Construction Draw Schedule – Funds are disbursed in stages based on work completed (inspections required).

5️⃣ Final Inspection & Loan Conversion – Once construction is complete, loan transitions to a permanent mortgage.

Construction Loans vs. Traditional Home Loans

Is a Construction Loan Right for You?

If you’re looking to build a home from the ground up or fund a major renovation, a construction loan offers customized financing to fit your needs. Contact us today to discuss your options and get pre-approved for your construction loan