Find Construction Loan Lenders for Your Custom Home Build.

A construction loan is a short-term, higher-interest loan that provides the funds needed to build a residential property. Unlike a traditional mortgage — which finances an existing home — a construction loan finances the actual building process, from breaking ground to the final walk-through.

Construction loans work differently from conventional mortgages in one important way: instead of receiving a lump sum at closing, funds are disbursed in stages called draws. As each phase of construction is completed — foundation, framing, roofing, interior work — the lender releases the next tranche of funds. This protects both the borrower and the lender by ensuring money is only spent on completed work.

Most construction loans are structured as construction-to-permanent loans, which automatically convert into a standard 15- or 30-year mortgage once construction is complete. This "one-time close" approach saves borrowers the cost and hassle of a second closing. Alternatively, a stand-alone construction loan covers only the build period, requiring the borrower to secure separate permanent financing afterward.

Who needs a construction loan? Anyone planning to build a custom home from the ground up, purchase and renovate a fixer-upper beyond what a standard renovation loan covers, or construct a home on land they already own. Construction loans are also used by owner-builders — individuals who act as their own general contractor — though these borrowers face stricter qualification requirements.

Qualifying for a construction loan typically requires a higher credit score (usually 680 or above), a larger down payment (often 20–25%), detailed construction plans, a licensed general contractor, and a realistic budget with contingency reserves. Because the risk to lenders is higher during the build phase, interest rates on construction loans are generally 1–2% above conventional mortgage rates.

The good news: working with lenders who specialize in construction financing makes the process significantly smoother. They understand draw schedules, contractor requirements, and the unique challenges of building a custom home — and they can guide you from pre-approval through your final certificate of occupancy.