Estimate your monthly payment, down payment, and total cash needed to finance your home build. Updated for 2026 rates.
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Construction Loan FAQ
What is a construction loan?
A construction loan is a short-term loan that funds home building. Unlike a mortgage, funds are disbursed in draws as construction progresses. Once complete, it typically converts to a permanent mortgage.
What down payment is required?
Most lenders require 20–25% down for construction loans. Some programs allow 10–15% with strong credit (720+). The higher down payment reflects the increased risk — there's no completed home as collateral during building.
What credit score do I need?
Most construction lenders require a minimum 680–700 credit score. For the best rates (under 7.5%), aim for 740+. Below 680, you may need to find a specialized lender or improve your credit first.
How are construction loan payments calculated?
During construction, you pay interest only on the amount drawn — not the full loan. As draws increase, your payment grows. Once construction is complete and the loan converts to a mortgage, you pay principal + interest on the full amount.
What's the difference between a construction loan and a mortgage?
A mortgage is for an existing home. A construction loan funds a build and is typically short-term (12–18 months). A construction-to-permanent loan combines both: construction financing that automatically converts to a 30-year mortgage at completion.
Do I need a cost estimate to get a construction loan?
Yes — lenders require a detailed, itemized construction cost estimate before approval. This should break down all 14 cost categories including materials, labor, GC fees, and contingency. Our Cost Report ($19.99) provides exactly this format.