Finance your dream home from the ground up with flexible construction financing
Design and build a custom home that perfectly meets your needs and preferences instead of compromising with existing properties on the market.
Some construction loans offer a single closing for both the construction phase and permanent mortgage, saving you time and closing costs.
Funds are disbursed in stages as construction progresses, meaning you only pay interest on the amount that has been drawn.
Once construction is complete, your loan automatically converts to a traditional mortgage with your preferred terms.
Lender-required inspections at each draw stage ensure quality construction and help keep your project on track and on budget.
Choose from conventional, FHA, VA, and USDA construction loan programs based on your eligibility and specific needs.
Most construction loans require a minimum credit score of 680 or higher, with lower rates available for scores above 740.
Typically 20-25% for conventional construction loans. Some government-backed options like VA and FHA may offer lower down payment requirements.
Maximum DTI ratios typically range from 36-45%, with lenders focusing on your ability to handle potential cost overruns.
Licensed, insured builders with a proven track record of quality construction are required. Most lenders will need to approve your builder.
Detailed architectural plans, specifications, and a construction contract with a fixed price and build timeline are needed for approval.
Cash reserves for potential cost overruns (typically 10-15% contingency) and several months of housing payments are usually required.
Determine your construction budget and financing options. We'll help you understand different construction loan programs and maximum loan amounts.
If you don't already own land, your construction loan can include funds for the lot purchase. Some borrowers secure the land first with a separate loan.
Choose a qualified builder, finalize architectural plans, and obtain detailed cost breakdowns and construction timelines for lender review.
An appraiser will determine the as-completed value based on your plans and specifications. The lender will review your complete application for final approval.
Once approved, you'll close on your construction loan. If purchasing land simultaneously, those funds will be disbursed at closing.
Construction begins with periodic inspections and draw disbursements as work progresses. Interest is typically only charged on funds that have been disbursed.
Common construction loan programs include one-time close construction-to-permanent loans, two-time close construction loans, FHA construction loans, VA construction loans, and renovation construction loans for major rebuilds.
Loan amounts are typically based on the lesser of the construction costs or a percentage of the appraised value of the completed home (typically up to 80-95% depending on the program). Maximum loan amounts vary by program and location.
Funds are disbursed in draws (typically 5-7) at predetermined stages of construction after inspection confirms the work has been completed. Interest is only charged on the amount disbursed, not the total loan amount.
A one-time close loan combines the construction financing and permanent mortgage into a single loan with one closing, saving time and closing costs. A two-time close involves two separate loans: a short-term construction loan followed by a permanent mortgage when construction is complete.
Most construction loans allow 6-12 months for completion, though the exact timeline depends on the complexity and size of the project. Extensions may be possible but often involve additional fees or rate adjustments.
Most lenders require a licensed professional builder to construct the home. Some programs may allow owner-builders with significant documented construction experience, but these options are limited and may require larger down payments.
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For information purposes only. This is not a commitment to lend or extend credit. Information and/or dates are subject to change without notice. All loans are subject to credit approval. E Mortgage Capital, Inc. d/b/a E Mortgage Capital, NMLS# 1416824. Equal Housing Lender (NMLS consumer access: https://www.nmlsconsumeraccess.org/_)
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A toll-free consumer hotline is available at 1-877-276-5550. The department maintains a recovery fund to make payments of certain actual out of pocket damages sustained by borrowers caused by acts of licensed mortgage banker residential mortgage loan originators. A written application for reimbursement from the recovery fund must be filed with and investigated by the department prior to the payment of a claim. For more information about the recovery fund, please consult the department’s website at