Construction Loan Calculator

Construction loans are short-term loans used to finance the building of a new home. They typically feature interest-only payments during construction, followed by conversion to a permanent mortgage once building is complete. Funds are disbursed in stages as construction progresses, based on inspections and completion milestones.

Construction-to-permanent loans convert to your permanent mortgage automatically, requiring only one closing. This saves on closing costs and locks in your rate upfront. Construction-only loans require a separate permanent financing application and two closings, giving you more flexibility to shop for rates at completion.

Construction loans typically require 20-25% down payment, though this can vary based on your credit score, the builder's qualifications, property location, and loan program. Some programs may allow lower down payments for qualified borrowers.

Yes! If you already own the land, you can often use it as equity toward your down payment. The land value will be appraised and can reduce the amount of cash you need for the down payment on the construction loan.

Funds are disbursed in draws based on construction milestones. Typically, there are 4-6 draws throughout the building process, including foundation completion, framing, drywall, and final completion. Each draw requires an inspection to verify progress.

It's important to include a contingency fund (typically 5-10%) in your construction budget. If you go over budget, you may need to provide additional cash or apply for a loan modification. Working with an experienced builder helps prevent cost overruns.

Construction loans typically require good to excellent credit (620+ score), as they're considered higher risk. If you have credit challenges, consider working on improving your credit score first or exploring alternative financing options with higher down payment requirements.

The pre-approval process typically takes 1-2 weeks, while full approval can take 2-4 weeks. Construction itself usually takes 6-12 months depending on the home size and complexity. The entire process from application to move-in typically ranges from 8-14 months.