Construction Loan

A construction loan is a short-term financing product used to fund the building of a new home, with proceeds disbursed in stages as construction milestones are completed.

Unlike a traditional mortgage, construction loans are drawn in incremental payments — called draws — that correspond to phases of the build (foundation, framing, roofing, etc.). Once construction is complete, the loan typically converts to a permanent mortgage or is refinanced into a standard loan.

Construction loans carry more risk for lenders, which is why they often require higher credit scores, larger down payments, and more documentation than standard purchase loans. The approval process includes review of the builder, blueprints, and projected costs.

Why This Matters: Building a home is one of the most complex transactions in real estate. Having a lender who understands construction timelines, draw schedules, and builder requirements helps you avoid costly delays and financing gaps.