Question 1

What's the difference between a construction loan and a mortgage?

Accepted Answer

A construction loan funds in phases as work progresses. You pay interest only on the amount drawn. A mortgage funds all at once at closing. Construction is temporary; you refinance into a permanent mortgage when the home is done.

Question 2

How much do I need to put down on a construction loan?

Accepted Answer

Most lenders require 15% to 25% down. Some require more if the builder is new or the project is complex. Your down payment reduces the lender's risk during construction.

Question 3

Can I use a construction loan if I don't own the land yet?

Accepted Answer

Yes — the construction loan can include the land purchase price. You'll need to show the purchase contract and proof of the land's clear title. The lender will appraise the land and the proposed construction separately.

Question 4

How long does a construction loan take to close?

Accepted Answer

Expect 45 to 60 days from application to first draw. The lender needs time to review the builder, the plans, and the construction contract. Existing-home purchases close in 30 days — construction takes longer.

Question 5

What happens when the house is finished?

Accepted Answer

You refinance the construction loan into a permanent mortgage. The lender appraises the completed home. You then lock in a standard 30-year fixed rate and move in. The refinance typically closes within 30 days of completion.

Construction Loans in Firebaugh: Build Your Home Your Way