A Construction Loan is a specialized financing option designed to fund the building or renovation of a property. This type of loan helps cover the wide range of expenses involved in a construction project, whether it’s a single-family home, multi-unit residence, or commercial structure. Unlike traditional mortgages, construction loans typically release funds in stages—called “draws”—that correspond to the project’s progress and timeline.
Because construction projects carry higher risk, borrowers often encounter higher interest rates and may be required to make a larger down payment, commonly between 10% and 30% of the project’s total cost. To approve the loan, lenders review detailed construction plans, budgets, and schedules to ensure the project is feasible and financially sound.Because construction projects carry higher risk, borrowers often encounter higher interest rates and may be required to make a larger down payment, commonly between 10% and 30% of the project’s total cost. To approve the loan, lenders review detailed construction plans, budgets, and schedules to ensure the project is feasible and financially sound.