Construction Finance
Construction loans
explained.
Construction loans are short-term financing used to fund the building of a new home or major renovation. They work differently from standard mortgages — here's how.
Construction loans are short-term financing used to fund the building of a new home or major renovation. They work differently from standard mortgages — here's how.
A construction loan provides funds to pay contractors and suppliers as work is completed — disbursed through a draw schedule rather than as a lump sum at closing. During construction, borrowers typically make interest-only payments on the drawn amount. Once construction is complete, the loan either converts to a permanent mortgage or is paid off through a new loan.
Common construction loan structures include construction-to-permanent (one closing, converts to mortgage at completion), stand-alone construction (two closings — construction loan then separate mortgage), and renovation/rehab loans for existing properties.
Construction loan qualification evaluates the borrower's financial profile alongside the project feasibility — plans, budget, contractor credentials, and timeline. Requirements vary by lender and program type. Speak with a licensed MLO to review your specific scenario.
A licensed MLO will review your situation and identify the right programs. NMLS# 1967971 · FL, TN, SC, CO, TX.
All content on this page is for informational and educational purposes only and does not constitute financial, legal, or mortgage advice. Loan programs, qualification requirements, and availability are subject to change without notice and vary by lender, borrower profile, property type, and market conditions. All loans are subject to credit approval. Not a commitment to lend. Speak with a licensed Mortgage Loan Originator for guidance specific to your situation. New Century Mortgage LLC · NMLS# 1967971 · Equal Housing Lender · NMLSConsumerAccess.org