Construction Loan
One-time close, ground-break to keys.
Financing for building a new home, with a single closing that converts to permanent financing once construction is complete.
What is a Construction loan?
A construction-to-permanent loan funds the build in stages (draws) and automatically converts to a long-term mortgage upon completion, avoiding a second closing.
Designed for
Buyers building a custom or semi-custom home on owned or purchased land.
Why choose it
It streamlines the entire construction financing process into one loan with one set of closing costs.
Common use cases
- ◆Custom-home builds on owned land
- ◆Land purchase plus construction
- ◆Tear-down and rebuild projects
- ◆New-home builds with production or custom builders
Built for borrowers who look like this.
Custom-home buyers
Building from a personalized plan.
Landowners
Ready to develop existing property.
Move-up buyers
Building a longer-term family home.
Design-forward buyers
Not finding the right home in inventory.
The advantages.
Single closing
One loan, one appraisal, one set of costs.
Interest-only during build
Payments generally cover interest on drawn funds.
Rate certainty
Lock the permanent rate before construction begins.
Streamlined draws
Funds released as project milestones are met.
Things to weigh.
Detailed documentation
Plans, budgets, and builder vetting required.
Timelines matter
Delays can affect draw schedules and pricing.
Contingency reserves
Budget cushions are typically required.
Builder approval
The general contractor must meet lender criteria.
What lenders generally look for.
Requirements vary based on lender guidelines and borrower qualifications. The below is educational — not a commitment or offer of credit.
- Down payment
- Typically larger than a purchase loan; varies by program
- Credit expectations
- Strong credit generally required
- Builder
- Licensed, insured, and lender-approved
- Plans and budget
- Detailed cost breakdown and specifications required
Answers to what borrowers ask most.
Is it one loan or two?
One-time-close construction loans combine the build and permanent mortgage into a single closing.
Do I pay interest during construction?
Yes, generally interest-only on funds drawn.
Can I use my own builder?
Only if they meet the lender's builder-approval standards.
Can I include land purchase?
Yes, land acquisition can typically be rolled into the loan.
What if construction runs late?
Extensions may be available, potentially with additional cost.
Can I make design changes mid-build?
Changes are possible but often require re-approval.
How are draws released?
In stages, upon inspection of completed work.
Is a large down payment required?
Down payment expectations vary by program.
Do I need a permanent mortgage lock upfront?
Yes, permanent-loan terms are typically set at closing.
Can it be used for renovation?
Renovation-specific programs exist and may be a better fit.
Home Construction Financing Guide
Ground-break to closing, explained.
Run the numbers.
Complementary programs worth exploring.
Renovation
Combined financing for buying and improving a home, folded into one streamlined mortgage.
Explore Renovation loan requirementsConventional
A traditional mortgage backed by Fannie Mae or Freddie Mac guidelines, offering competitive rates and flexible terms.
Explore Conventional loan requirementsJumbo
High-balance mortgages for loan amounts that exceed conforming limits, often up to $5M and above.
Explore Jumbo loan requirementsAsk about Construction.
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