Solutions
Construction Loans: Financing a Home You Build
From a lot and a blueprint to a finished home — how the financing actually works.
Building a home is a different kind of financing than buying one, because the collateral does not exist yet. A construction loan funds the build in stages and then becomes — or is replaced by — a permanent mortgage once the home is complete.
How the money flows
Rather than a single lump sum, a construction loan releases funds in draws tied to stages of completion — foundation, framing, systems, finish. You typically pay interest only on the amount drawn so far during the build, which keeps the carrying cost manageable while the home rises.
One closing or two
- Construction-to-permanent — a single loan that converts to a standard mortgage when the home is finished, with one closing and one set of costs. The clean, popular choice.
- Two-time close — a short-term construction loan followed by a separate permanent loan, with more flexibility but a second closing.
Pro tip
Lock in how your rate is handled for the permanent phase before you break ground. A construction-to-permanent loan with a clear rate plan removes the biggest uncertainty from a long build.
Best fit: buyers building a custom or semi-custom home who want financing that matches the real rhythm of construction.
Common questions
Do I make full payments during construction?
Usually you pay interest only on the funds drawn so far while the home is being built, then begin full principal-and-interest payments once it converts to a permanent mortgage. That keeps costs lower during the build.
What is construction-to-permanent financing?
It is a single loan that funds the build and then automatically becomes your long-term mortgage when the home is finished — one application, one closing, one set of costs.