Construction Loans
Whether you're building a custom home, developing a residential community, or constructing investment properties, MyLoanDesk offers construction financing structured around your project's timeline — from groundbreaking to certificate of occupancy. Our construction-to-permanent loans combine your build financing and your long-term mortgage into a single closing, so you're not qualifying twice or paying two sets of closing costs.
Estimate only, based on common construction lending guidelines (up to 80% of total project cost, capped at roughly 75% of completed value). Actual loan amount, rate, and terms depend on underwriting, the builder, and the specific project.
What Is a Construction Loan?
A construction loan is short-term financing used to pay for building a home or development project from the ground up. Rather than receiving the full loan amount at closing like a traditional mortgage, funds are released in stages — called draws — as construction reaches specific milestones. Once the home is complete, most construction loans either require a separate mortgage to pay off the balance, or, with a construction-to-permanent loan, automatically convert into a standard long-term mortgage at a single closing.
Because the collateral (the finished home) doesn't exist yet at the time of closing, construction loans are underwritten differently than a mortgage on an existing property — lenders evaluate the borrower, the builder, the plans, and the budget together.
How Construction Financing Works
Program Highlights
- Construction-to-permanent options that convert to a standard mortgage at completion
- Interest-only payments during the build phase
- Draw schedules aligned to construction milestones
- Available for custom homes, spec builds, and small residential developments
- Land acquisition financing available if you don't already own the lot
- Existing land equity can be credited toward your down payment
A construction-to-permanent loan means one closing, not two — saving on closing costs and eliminating the risk of needing to re-qualify for a separate end loan once the home is complete, when rates or your financial picture may have changed.
Draw schedules tied to inspected milestones protect both the builder's cash flow and the lender's collateral, keeping the project funded at each stage without requiring you to front costs out of pocket.
If you already own the land, its equity can often be credited toward your required down payment — reducing the amount of new cash you need to bring to the project.
Who Construction Loans Are For
- Buyers building a custom home on land they own or are purchasing
- Small developers building spec homes to sell upon completion
- Investors constructing new rental or multifamily properties
- Landowners looking to use their lot's equity toward a new build
- Buyers who want a single closing rather than separate construction and end loans
Construction Loans vs. Other Financing Options
| Construction-to-Permanent | Renovation Loan | Conventional Mortgage | |
|---|---|---|---|
| Best for | Building a new home from the ground up | Renovating an existing home | Purchasing a completed, move-in-ready home |
| Funds disbursed | In draws, tied to construction milestones | Often in draws, tied to renovation scope | In full, at closing |
| Payment during project | Interest-only on funds drawn | Varies by program | N/A — no project phase |
| Number of closings | One, if construction-to-permanent | One | One |
| Collateral at closing | Land plus plans (home doesn't exist yet) | Existing home | Existing home |
Eligibility Requirements
- Credit score of approximately 680+ (varies by lender and project type)
- Detailed construction plans, specifications, and a realistic budget
- A licensed, vetted builder or general contractor
- Down payment or land equity, typically 10–25% of total project cost
- Sufficient reserves to cover contingencies and unexpected cost increases
Frequently Asked Questions
What is a construction-to-permanent loan?
A construction-to-permanent loan combines your short-term construction financing and your long-term mortgage into a single loan with a single closing. Once the home is complete, the loan automatically converts into a standard mortgage, so you avoid closing twice and re-qualifying for a separate end loan.
How much down payment is required for a construction loan?
Down payment requirements for construction loans are typically higher than for a standard mortgage, often ranging from 10% to 25% of the total project cost, depending on the lender, the borrower's credit profile, and whether the land is already owned free and clear.
How do construction loan draws work?
Instead of receiving the full loan amount upfront, funds are released in stages called draws, tied to completed construction milestones such as foundation, framing, and finishing. An inspection typically confirms each stage is complete before the next draw is released.
Do I pay principal during construction?
Most construction loans are interest-only during the build phase, and interest is typically charged only on the funds that have actually been drawn, not the full loan amount. Principal payments generally begin once the loan converts to a permanent mortgage after construction is complete.
Can I use a construction loan to build on land I already own?
Yes — if you already own the land free and clear, its value can often be used as equity toward your down payment requirement, which can reduce the amount of cash you need to bring to closing.
What credit score is needed for a construction loan?
Construction loans generally require a stronger credit profile than a standard mortgage, often 680 or higher, since the lender is financing a project that doesn't yet exist as collateral. Builder experience and a detailed budget and plan set can also strengthen an application.
How long does construction loan financing take to close?
Initial closing on a construction-to-permanent loan typically takes a similar timeframe to a conventional mortgage, often 30 to 45 days, since it requires underwriting the borrower, the builder, and the full project plans and budget.
What happens if construction costs more than the original budget?
Cost overruns are common in construction projects. Many lenders require a contingency reserve built into the original budget, and some allow a loan modification if costs increase significantly. Planning a realistic budget with a contingency buffer upfront is the best way to avoid a funding gap mid-project.