Construction Loan: Build or Renovate With Flexible, Stage‑Based Financing
Quick Facts
- Short‑term financing for building or major renovations
- Funds released in stages (draws)
- Interest‑only during construction
- Converts to permanent loan with some lenders
- Works for primary, second, or investment properties
What Is a Construction Loan?
A Construction Loan provides short‑term financing to build a new home or complete major renovations. Funds are released in stages as the project progresses, giving borrowers flexibility and control throughout the construction process.
Construction Loan Benefits
- Interest‑only payments during construction
- Flexible draw schedules
- Finance land + construction together
- Convert to a permanent mortgage with one‑time close options
- Ideal for custom homes or major renovations
Construction Loan Eligibility Requirements
- Strong credit profile
- Detailed construction plans and budget
- Licensed builder or contractor
- Adequate reserves (varies by lender)
- Appraisal based on completed value
- Full underwriting review required
How a Construction Loan Works
Borrowers submit plans, budgets, and builder information. After approval, funds are released in stages as construction progresses. During the build, payments are typically interest‑only. Once the home is complete, the loan is paid off or converted into a long‑term mortgage.
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