From plans to draws
Before closing, the lender typically reviews plans, specifications, contracts, budget, permits or permit status, builder qualifications and an appraisal based on the proposed completed project. During construction, funds are released after required inspections and documentation.
One-time close versus separate financing
A construction-to-permanent loan may combine the construction phase and permanent mortgage within one closing structure. Other transactions use a short-term construction loan followed by a separate refinance after completion. Each path creates different rate, qualification, timing and closing-cost considerations.
What makes a project financeable
A complete and realistic project package reduces uncertainty. Lenders evaluate contingency funds, borrower contribution, site control, plans, schedule and the experience and financial capacity of the builder.
- Detailed plans and specifications
- Executed builder contract and line-item budget
- Construction schedule and draw plan
- Permits or lender-approved permit status
- Appraisal of the proposed completed home
- Reserves and contingency funds
Common questions
Frequently asked questions
Can a construction loan include the land?
Depending on the program and transaction, eligible land acquisition or documented land equity may be incorporated into the financing structure.
Do I make payments during construction?
Construction-phase payment structures vary. Many loans require interest payments based on funds drawn, while other structures may handle eligible interest differently. Confirm the exact terms before closing.
Can I act as my own general contractor?
Most programs require an approved, qualified builder. Limited owner-builder options may exist, but they typically have stricter experience, documentation and risk requirements.