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Are you planning to build your next home? If so, it’s important you learn how construction loans work and what they are. Also known as construction mortgage or building loan, these are loans that will be used towards the construction of a new home, rather than the purchase of an existing one. There’s no need to compromise if you don’t have to– a construction loan is an excellent opportunity to create the perfect home for you and your family.

How Does a Construction Loan Work?

As with any other mortgage, if you’re interested in a new home construction loan, you will need to file an application. If a borrower is approved for a construction loan, the funds for building their new home will be disbursed to the builder over the course of the building process. The exact intervals and terms of these payments will be agreed upon in advance with the lender. Your interest rate may vary during this time– we encourage you to discuss your long-term rate lock options with your loan officer.
But how do construction loans work after the home is completed? When the building period is over, many construction loans will automatically convert to a more standard mortgage. In this case, you will make payments to the lender just like any other mortgage. Other construction loans may require you to refinance after the construction period. Be sure you know which of the two you agree upon before signing, so you are all set to move in and start your new chapter.

How do I know if a construction loan is right for me?

Every building project is different. We encourage soon-to-be homeowners to explore our resources for new construction financing early in the process of obtaining a construction loan. Our construction specialists will be able to assist you with anything and everything you need to know about how mortgages work for new construction. You can contact us at 1 -877- 788-3520.


Subject to credit approval. Terms and conditions may apply. Property insurance is required for all loans secured by property.

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.