Skip to Main Content

Embarking on the journey to build your dream home is exciting, but navigating the construction loan process can feel daunting. If you dream of constructing a home but are hesitant about the loan process, you’re not alone. Many share your concerns about navigating what seems like a complicated path.

So, let’s demystify the construction loan process. Below, you’ll find a clear, step-by-step roadmap that will leave you feeling more informed, less stressed, and ready to take the next step with confidence.


The Construction Loan Process: Step-by-Step

The process for securing a construction loan differs from typical mortgages. Understanding these differences is crucial whether you’re a first-time borrower or have previous loan experience. Here’s what you need to know:


  1. Application Phase: Your journey begins with your online application. Unlike standard loans, construction loans are based on budget and appraised value estimates, but don’t worry – you can adjust these aspects before securing your loan.
  2. Document Submission: Next, you’ll provide the necessary documentation. This includes financial statements (debt, income, and assets), a signed construction contract with your builder, and a construction timetable outlining start and completion dates.
  3. Underwriting Process: After we receive your documents, the underwriting process commences. This stage assesses your financial stability and the feasibility of the construction project.
  4. Plan and Budget Submission: We require detailed floor plans and a comprehensive budget for an accurate appraisal. This budget should cover the entire scope of the project.
  5. Conditional Loan Approval: In many cases, loan approval is granted before the appraisal, based on preliminary checks of credit and finances.
  6. Appraisal: An appraisal is ordered to evaluate the project based on your plans and budget. This process typically takes 2-3 weeks.
  7. Final Steps to Closing: As closing approaches, several tasks are completed: confirming the loan amount, locking in the loan, reviewing the cash needed at closing, and finalizing conditions. A final statement from the builder will also be required, outlining any pre-paid costs and deposits needed at closing.


Estimated Timelines for Construction Loans

The construction loan process typically takes between 30 to 60 days. However, timelines may vary based on several factors, including appraisal timelines and underwriting queues. Being aware of these will help you plan more effectively.


Factors That Can Extend the Construction Loan Process

While our goal is to facilitate a smooth and efficient process, several factors may potentially extend the timeline of your construction loan approval. Being mindful of these can help you plan more effectively and potentially streamline your journey.


  • Document Responsiveness: Quick and complete responses to document requests can significantly reduce delays.
  • Bank Statement Analysis: We verify that the funds you’re using are yours. Be ready to explain significant deposits in your bank statements.
  • Loan Processing Volumes: The number of loan applications being processed can impact turnaround times, especially during peak seasons.
  • Plans and Budget Development: Finalizing your construction plans and budget can take time, but it’s essential for an accurate and successful project.


Stress-Free Construction Loan Approval

The journey to obtaining a construction loan may have multiple steps, but it doesn’t have to be overwhelming. You can confidently navigate each phase with a clear understanding of the process and the right partner by your side. Although your project’s specifics may differ post-funding, the fundamental construction loan procedure remains consistent for most borrowers.


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

This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information on financial planning or investment advice, consult a registered investment advisor or financial planner. For tax advice, please consult a tax professional.

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 you individual situation.