Construction Loans
Building a home from the ground up takes a different kind of loan. A construction loan gives you the money you need as your home gets built — not all at once, but in stages as the work progresses. J.D. Peck and the JD.Mortgage Team works with builders, contractors, and buyers across 49 states to make this process as simple as possible. Talk to our team about your build.
What Is a Construction Loan?
A construction loan is a short-term loan that pays for building a home. Instead of getting all the money upfront, you get it in stages — called draws — as each part of the build is finished. Once construction is complete, the loan either converts to a regular mortgage or you refinance into one.
Construction-to-Permanent
One loan covers both the build and the long-term mortgage. You close once, which saves on closing costs. Great for buyers who want simplicity.
One-Time Close
Similar to construction-to-permanent but your rate and terms are locked at the start. You know exactly what your mortgage will look like before you break ground.
Two-Time Close
Separate loans for the build and the mortgage. More flexibility on the final loan terms, but you close twice and pay closing costs twice.
Who Can Use a Construction Loan?
Construction loans are available for a wide range of buyers and projects. Here is who typically qualifies:
- First-time homebuyers building their first home
- Veterans using VA construction benefits
- Buyers in rural areas using USDA programs
- Real estate investors building rental properties
- Families building a custom dream home
- Buyers using FHA or conventional programs
How the Draw Process Works
Money is released in stages as your home is built. Each stage is called a draw. A lender-approved inspector visits the site to confirm work is complete before each draw is released. Here is a typical schedule:
| Build Stage | What Happens | Typical % of Loan |
|---|---|---|
| Foundation | Concrete poured, footings complete | 10–15% |
| Framing | Walls, roof structure in place | 15–20% |
| Rough-In | Plumbing, electrical, HVAC installed | 15–20% |
| Drywall & Interior | Walls closed, flooring begun | 15–20% |
| Completion | Final inspection passed, move-in ready | 25–30% |
Construction Loan Programs We Offer
VA Construction Loans
Veterans can use their VA benefit to build a home with no down payment. The VA construction loan follows the same benefit rules as a standard VA purchase — no PMI, no minimum credit score requirement from the VA.
FHA Construction Loans
FHA construction loans allow down payments as low as 3.5%. Good for buyers with lower credit scores who want to build rather than buy.
USDA Construction Loans
For eligible rural properties, USDA construction loans offer zero down payment. Income limits and geographic requirements apply.
Conventional Construction Loans
For buyers with strong credit and higher loan amounts. Down payment requirements vary. May avoid mortgage insurance with 20% down.
Modular & Manufactured Construction
Some programs support modular or manufactured homes built to HUD standards. This can be an affordable option for cost-conscious buyers in qualifying areas.
Investor Construction Loans
Building rental or investment properties? We have programs for investors including non-QM options when traditional income documentation does not fit.
What You Will Need to Qualify
Documents to Prepare
- Government-issued photo ID
- 2 years of W-2s or tax returns
- 30 days of pay stubs
- 2 months of bank statements
- Signed builder contract
- Approved construction plans and cost breakdown
Builder Requirements
- Licensed and insured general contractor
- Fixed-price contract preferred
- Lender-approved builder in most cases
- Detailed project timeline
- Cost breakdown by phase
Common Construction Loan Challenges
Building a home is exciting — but things can go sideways. Here is what we help you prepare for:
| Challenge | How We Help |
|---|---|
| Builder delays | We build buffer time into your loan timeline and communicate proactively |
| Cost overruns | We review your budget in detail before closing to catch gaps early |
| Material price increases | We help structure contingency funds into your loan where possible |
| Draw disputes | We work with inspectors and builders to keep funds moving smoothly |
| Rate changes mid-build | One-time close locks your rate upfront so you are protected |
Construction Loan FAQs
Do I make payments during construction?
Usually yes, but only on the amount drawn so far. During construction you typically make interest-only payments, which keeps your payment low while the home is being built.
Do I need a large down payment?
It depends on the program. VA and USDA offer zero down. FHA requires as little as 3.5%. Conventional loans may require 5–20% depending on your credit and loan size.
Can I be my own builder?
Most lenders require a licensed general contractor. Owner-builder loans exist but are rare and harder to qualify for. We can tell you what is available in your state.
What happens if my build goes over budget?
Cost overruns are common. That is why we review your budget carefully upfront. If costs grow during the build, options include a contingency reserve, construction change orders, or supplemental financing.
How long does the process take?
Getting approved for a construction loan typically takes 30–60 days. The build itself can take 6–18 months depending on the size and complexity. We stay with you the entire time.
Ready to Build?
We work with buyers at every stage — from land purchase to final walkthrough. Tell us about your project and we will map out the right loan structure for your timeline and budget.
Related Loan Options
Not sure if a construction loan is the right fit? Compare with: VA Loans, HELOC, Second Mortgage, Non-QM Loans, All Loan Options.