Mortgage Lenders

A construction loan is short-term financing that covers the cost of building a home. Unlike a traditional mortgage, funds are released in stages (called "draws") as construction milestones are completed. Most construction loans convert to a permanent mortgage once building is finished — this is called a construction-to-permanent loan.

With a regular mortgage, you're buying an existing home. With a construction loan, the lender is financing something that doesn't exist yet. Because of this, lenders require approved plans, a licensed contractor, and a detailed budget. Interest rates are typically higher during the build phase, and you usually only pay interest on the amount drawn so far.

Most construction loans require 20–25% down, though some programs (FHA, VA, USDA) may allow less. If you already own the land, its equity can often count toward the down payment. Your lender can walk you through the specific requirements based on your financial profile and the loan program.

Yes — many lenders offer land-plus-construction loans that bundle the land purchase and building costs into a single loan. This simplifies the process and avoids the need for a separate land loan. If you already own the land free and clear, that equity typically counts toward your down payment.

You'll need a licensed contractor before the loan closes, but you can start the pre-approval process without one. Pre-approval tells you how much you can borrow, which helps you set realistic expectations before choosing plans and a builder. Narrow helps you find vetted contractors later in the process (Step 6).