Construction Loans: New-Build Financing From Ground-Up to Move-In
Building from the ground up — whether it's a primary residence, a spec home, or an investment build — needs financing structured differently than a standard purchase. A construction loan funds the build in stages as work is completed, rather than handing over the full loan amount on day one.
How draw schedules work
Instead of disbursing the full loan at closing, the lender releases funds in draws tied to construction milestones (foundation, framing, rough-in, finishes, and so on), typically verified by an inspection before each draw is released. This protects both the lender and the borrower by tying funding to actual progress.
Construction-to-permanent vs. stand-alone construction loans
A construction-to-permanent loan converts automatically into a standard mortgage once the build is complete — one closing, one set of costs. A stand-alone construction loan is a separate short-term loan that you then refinance into permanent financing once the certificate of occupancy is issued. Which structure makes sense depends on your timeline and whether you want to lock financing terms now or after completion.
What lenders look at
Beyond the usual credit and down payment review, construction lending also weighs the builder (licensed GC vs. owner-builder), the construction budget and timeline, and the property's as-completed appraised value. Programs vary in how they handle each of these, so the right fit depends on who's building and how the project is structured.
After the build
Once construction wraps and the property is ready to rent rather than occupy, investors sometimes move into long-term financing via a DSCR loan rather than a conventional permanent mortgage — worth planning for before you break ground if a build is going to become a rental.
Planning a new build or major renovation?