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When you’re navigating the lenders’ resources (including our Learning Center), you might assume you know the difference between these two kinds of loans: construction loan vs. mortgage. If, like many of our borrowers, you’ve just learned how accessible financing can be for building your family’s dream home, you may not yet know the difference between the two.

Construction Loan vs. Mortgage or Home Loan

 Although some people use the terms “construction loan” and “construction mortgage” interchangeably, “construction loan” is the correct technical term for a short-term loan you take out to fund the costs of building your new home. When the term expires, usually after one year or at the end of the build period, you may be required to refinance the loan into a long-term mortgage, like the kind you would get if you were purchasing a home that’s already built.

The confusion between “construction loan” vs “construction mortgage” may arise from the popularity of construction-to-permanent mortgages, also called single-close construction loans. These begin as construction loans, but automatically convert to a typical mortgage when the home is built. So a construction loan may not technically be a mortgage, but in this case there is no functional difference, as you will have a mortgage automatically when the house is done!

Get the Best on Your Side

We don’t want you to compromise on your family’s future. Whether you’re deep in the drafting phase, just starting out, or you need a new lender to get you closed quickly, The Federal Savings Bank is here to help you out. Our team of seasoned loan officers is reachable at 877-788-2520. You can expect personalized attention to your individual needs as your loan officer helps guide you to the best home you can afford – the home that will suit your family’s needs for many years to come.

The Federal Savings Bank proudly offers both single-close construction mortgage loans and other construction loans for those who are looking for more flexibility. We also offer low-cost FHA home loans and VA mortgages for borrowers who qualify.

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