Construction Mortgages: Financing a Home You're Building

A construction mortgage funds a home you're building from the ground up — either on land you already own or purchasing as part of the deal — released in progress draws as construction reaches defined stages (foundation, framing, enclosed, and so on), rather than as one lump sum at closing like a conventional purchase.

This is meaningfully different from buying a pre-construction condo or home from a builder: with a builder pre-sale, the builder finances construction and you close once it's finished. With a true construction mortgage, you (or your contractor) are managing the build, and the lender is releasing funds as work is verified complete, typically via inspections between draws.

During the construction phase, most construction mortgages charge interest-only payments on the amount drawn so far, converting to a standard amortizing mortgage once the home is complete and a final inspection or occupancy permit is issued.

Because lenders are financing a home that doesn't exist yet, down payment requirements, contractor vetting, and documentation (building permits, cost estimates, a fixed-price contract) tend to be more involved than a standard purchase — starting this conversation with a lender early in planning, not after breaking ground, avoids expensive surprises.