What is a home construction loan?

When you need a home construction loan, we’ve got you covered.

A home construction loan is a short-term, higher-interest loan that provides the funds required to build a residential property. Typically, they are one year in duration.

During this time, your property must be built and a certificate of occupancy should be issued. Usually, you are required to have a 20% down payment or 20% equity (a building lot owned free and clear for example).

Once approved, you will be put on a draw schedule that follows the project’s construction stages, and will typically be expected to make interest only payments during the construction phase. 

These draws tend to happen when major milestones are complete. You are typically only obligated to repay interest on any funds drawn until construction is completed.

For a construction loan through Timberline Mortgage, you will be able to convert the construction loan to a traditional mortgage with long term financing once the home is completed. This is known as a construction-to-permanent loan.