Because there is no finished house to serve as collateral, qualification is stricter than for standard mortgages.
: Specifically for buyers purchasing a "fixer-upper" to finance both the home purchase and significant upgrades.
AI responses may include mistakes. For financial advice, consult a professional. Learn more What Are Construction Loans And How Do They Work? construction financing
: This covers only the build phase. Once the home is complete, you must pay off the loan in full, usually by taking out a separate mortgage. This involves two separate closings and two sets of fees.
: These loans typically last 12 to 18 months , covering only the building phase. Because there is no finished house to serve
: Funds are released to your builder as they complete milestones, such as laying the foundation or finishing the framing. Lenders often require an inspection before releasing the next draw.
Construction financing is a short-term, high-interest funding method used to cover the costs of building a new home or commercial property from the ground up. Unlike a traditional mortgage, which provides a lump sum to buy an existing home, construction loans are disbursed in stages—known as "draws"—as specific building milestones are reached. Core Concepts of Construction Loans For financial advice, consult a professional
: Most lenders require a score of at least 680 , though some may accept 620.