Construction Loan

A construction loan finances an approved home-building project. Funds are generally released in stages as work progresses rather than paid out as one unrestricted lump sum. The lender reviews the plans, budget, builder, property and your finances under its current program. Clarify the closing structure first. A construction-to-permanent option may combine the construction phase and permanent mortgage in one closing. A separate construction loan may require another closing for permanent financing. One closing does not remove completion, conversion or other conditions in the agreement. Discuss how draw requests, inspections and contractor payments work. Ask about the construction deadline, any interest charged on drawn funds, required payments during the build, rate changes and the conditions for permanent financing. Payment structure differs by program; do not assume every construction loan is interest-only or converts automatically. Plan for cost overruns, delays and changes before work begins. Review the contract and contingency budget, how changes are approved and who must supply additional funds if costs exceed the approved financing. A lender-approved budget does not guarantee the final project cost. Work Hard Mortgage can help compare the proposed structure, total costs, land or equity contribution, reserves and the permanent-loan payment. An existing-home renovation is a different project; ask which financing options fit that scope. Program details subject to confirmation. Builder, draw, completion, property, credit, income, down-payment and conversion requirements vary by lender and application. Loan approval and conversion are not guaranteed.