Construction Loans
Finance your dream home from the ground up with construction financing. Construction-to-permanent loans with one closing and expert guidance every step of the way.
How Construction Loans Work
Understanding the construction loan process from application to permanent financing
The Construction Phase
During construction, you'll make interest-only payments on the amount drawn. Funds are released in stages (draws) as construction milestones are completed.
- Inspection required before each draw
- Interest-only payments during construction
- Typical draw schedule: 5-7 stages
Conversion to Permanent
Once construction is complete, your loan automatically converts to a permanent mortgage with traditional principal and interest payments.
- No second closing required (construction-to-permanent)
- Rate lock options during construction depend on your lender
- Permanent loan terms vary by program
Construction-to-Permanent vs. Construction-Only
Construction-to-permanent loans come with one closing instead of two, which can reduce closing costs. The loan automatically converts to permanent financing once construction is complete. Construction-only loans require separate financing for the permanent mortgage, offering more flexibility but typically higher overall costs.
National Mortgage Center offers one-time close construction-to-permanent financing only. We don't offer construction-only (two-time close) loans.
Understanding Construction Loans
A construction loan is a short-term loan used to finance the building of a new home or major renovation project. These loans typically convert to a permanent mortgage once construction is complete.
Key Features:
- Interest-only payments during construction
- Draws disbursed as construction progresses
- Converts to permanent financing
- Builder approval process
Loan Types:
Loan types offered through Stride Bank, N.A.:
- One-time close construction-to-permanent loans;
- FHA 203(k) renovation loans.
Did You Know?
Construction-to-permanent loans come with one closing instead of two, which can reduce closing costs.
Benefits of Construction Loans
Frequently Asked Questions
What is a construction loan?
A construction loan is a short-term loan used to finance the building of a new home. Unlike traditional mortgages, construction loans are typically disbursed in stages as construction progresses and often convert to a permanent mortgage once construction is complete.
How do construction loan disbursements work?
Construction loans are disbursed in stages called 'draws' as construction progresses. Common draw stages include foundation completion, rough framing, roof and windows, interior finishing, and final completion. Each draw requires inspection and approval before funds are released.
What's the difference between construction-to-permanent and construction-only loans?
Construction-to-permanent loans require one closing and automatically convert to a permanent mortgage. Construction-only loans require separate closings for construction and permanent financing, offering more flexibility but typically higher overall closing costs. National Mortgage Center offers one-time close construction-to-permanent financing only. We don't offer construction-only (two-time close) loans.
What down payment is required for a construction loan?
Down payment requirements vary by lender and program. Land you already own may count toward the down payment, subject to lender approval and program guidelines.
How long does a construction loan last?
Construction loan terms typically include 6-12 months for the construction phase, with extensions possible if needed. The loan then converts to a permanent mortgage with terms that vary by program. The timeline should match your construction schedule.
What are the requirements for the builder/contractor?
Builders must typically be licensed and insured, have a proven track record, provide strong references, submit detailed construction plans, and demonstrate financial stability. The lender will verify all builder credentials before approval.
Can I build the home myself?
National Mortgage Center doesn't offer owner-builder construction loans. Construction loans offered through Stride Bank, N.A. are subject to credit approval, program guidelines, and property eligibility.
What happens if construction runs over budget?
To handle cost overruns, include a 10-15% contingency in your initial budget. You may need to pay overages out of pocket, or, in some cases, the loan may be modified, subject to lender approval. Careful planning and monitoring can help avoid overruns.
Ready to Build Your Dream Home?
Our mortgage team is here to help you finance your new home from the ground up
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