A construction loan for house can support your goal of building a new home, with flexible options to match your plans. Pre-qualify now or call 888-573-2640 to get started.
What is a construction loan for house?
A construction loan for house is special financing you need to build a new home from scratch. The way these loans work can make a huge difference between building your home smoothly and running into money troubles.
What does a construction loan cover?
You should know exactly what your construction loan for house covers before starting work on your dream home. Our team at Clear Rate Mortgage has seen many clients who are amazed by how much these specialized loans can cover.
Land or lot purchase
Your construction loan for house can help you buy the land where you'll build. This works great if you haven't bought your property yet.
Most clients love that they can combine their land purchase and construction costs into one loan instead of getting separate loans. construction-to-permanent loans let you add the land cost to your total project budget.
Labor and materials
These loans pay for builder costs and construction materials. The money comes in stages (called "draws") as your build moves forward.
Your contractors get paid at key points like when they finish the foundation, framing, roof, and final work. Our team at Clear Rate Mortgage makes sure these payments keep your project moving smoothly.
Permits and fees
Your loan takes care of government approvals and other admin costs. Building permits, septic design approvals, and other regulatory requirements are covered.
These admin costs make up much of your total budget something first-time builders often miss.
Contingency reserves
Smart builders plan for surprises, and that's why construction loans often come with contingency reserves. This extra money usually 5-10% of hard construction costs helps when unexpected costs pop up.
We recommend this safety net to handle things like material cost increases or design changes during construction.
Exclusions: design and furnishings
The physical structure is the main focus of construction loans. These loans don't usually cover architect fees, interior designer costs, or furniture.
But permanent fixtures and landscaping might qualify. Our team at Clear Rate Mortgage helps you understand these differences so you know exactly what your construction loan will pay for.
Types of home construction loans
Building your dream home starts with choosing the right construction loan for house based on your needs. Clear Rate Mortgage has financing options that match different construction plans.
Construction-to-permanent loan
This two-in-one solution works as short-term financing during building and automatically becomes a traditional mortgage after construction.
You pay interest-only on the amount you use. The loan changes to principal-plus-interest payments over 15-30 years once completed.
The best part? You only need to pay one set of closing costs, which cuts down your overall expenses by a lot. Clear Rate Mortgage's clients prefer this efficient approach because they don't need to qualify for two separate loans.
Construction-only loan
A construction-only loan covers just the building costs and you must pay it back fully after construction ends. You can settle this debt with cash or get a new mortgage (called an end loan).
This option gives you more flexibility, but note that you'll need two separate transactions and pay two sets of closing costs.
Your financial situation might also change during construction, which could affect your chances of getting that second mortgage.
Renovation loan
Renovation loans offer flexible options if you want to upgrade existing properties instead of building new ones. These loans work for everything from small cosmetic updates to major structural changes.
Clear Rate Mortgage provides several renovation financing options. FHA 203k-backed loans work great for primary residences.
Owner-builder loan
This special financing lets borrowers serve as their own general contractors. Owner-builder loans come as either construction-to-permanent or construction-only options.
Clear Rate Mortgage usually asks for proof of expertise through experience, education, or proper licensing because these loans carry more risk for lenders.
How to get a construction loan for house
Getting a construction loan for house needs good preparation and following several key steps. Starting your financing early makes the building process more efficient.
Find a licensed builder
A reputable, licensed builder should be your first partner before you apply for construction financing. Your lender will review your builder's credentials, insurance coverage, and track record.
The National Association of Home Builders directory can help you find qualified professionals. You can also ask trusted sources for recommendations.
Clear Rate Mortgage suggests meeting builders in person to learn about their experience with your preferred home style.
Choose a lender offering construction financing
Construction loans aren't available at all financial institutions. Look for lenders who specialize in construction financing. Clear Rate Mortgage's construction-certified loan officers know everything in building projects.
Prepare your documents and plans
You'll need complete documentation that includes detailed construction plans, specifications, budget breakdowns, and your builder's signed contract.
Your personal financial records should include tax returns, pay stubs, bank statements, and proof of assets. A strong application package shows your financial readiness and the project's viability.
Get pre-approved
The preapproval process helps set your budget before you finalize plans with your builder. This step usually takes 30-60 days and includes a review of your credit score, income, and debt-to-income ratio.
Clear Rate Mortgage suggests completing preapproval before you look for land or sign builder contracts.
Secure builder's risk insurance
Builder's risk insurance coverage is a requirement from most lenders before closing your construction loan. This specialized policy protects your property from risks like fire, theft, vandalism, and weather damage during construction.
Clear Rate Mortgage can help you get this vital protection for your investment.
Clear Rate Mortgage Makes Your Construction Loan for House Easier
At Clear Rate Mortgage, getting a construction loan for house doesn’t have to feel overwhelming. We walk with you from the first step to final approval clearly, quickly, and with your goals in mind.
You’ll always know where you stand because we value transparency, fast communication, and guidance that puts you first.
No confusing terms, no unrealistic promises just real help to build the home you’ve imagined.
Ready to get started? Call us at 888-573-2640 or pre-qualify now!
FAQs
1. Can I get a construction loan if I already own land?
Yes, many lenders let you use your land as part of the loan setup. It can help lower your out-of-pocket costs when building a home.
2. Do I need a finished design before applying for a construction loan?
Lenders usually ask for basic plans before approving your application. Having a clear idea of the layout helps move the process forward faster.
3. Can I change builders after the loan is approved?
Changing builders is possible, but it may delay your project and require extra paperwork. You’ll need approval from the lender before making any switch.
4. Is a construction loan only for building a brand-new home?
No, some construction loans also work for major rebuilds or large home upgrades. It depends on how extensive the work is.
5. What happens if construction takes longer than planned?
Most lenders offer some flexibility if delays happen. You just need to stay in close contact with your lender during the build.
