Best Construction Loan Lenders for 2023

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US Bank Reviews

US Bank

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Editor's Take

US Bank pairs you with a local loan officer to start the home construction loan process. They have several different types of construction loans available so you can get the financing you need, structured in a way that works.

Another perk is that since US Bank is well-versed in the new construction space, they have a lot of knowledge on how to make it a successful process from everyone’s point of view. The can even give you advice on how to get started and find the best general contractors in your area to work with.

Key Features

  • Flexible construction loan options
  • Local loan officer
  • Located in 41 states


  • No online application
  • Comprehensive construction loan resources
  • Substantial industry experience

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Wells Fargo

Wells Fargo

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Editor's Take

Wells Fargo offers a range of new construction loan products you can choose from. You can also participate in the Builder Best Extended Rate Lock program to protect you for up to 24 months with an interest rate lock.

Key Features

  • Online application available
  • Consultants available by phone
  • Flexible construction loan options


  • Extended rate lock program
  • Financing check list available
  • Nationwide network of loan officers

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Editor's Take

Normandy is a mortgage lender with specific expertise in residential construction loans as well as lot and land loans. They have funded over $800 million in loans total and fully service your loan as well. That means your loan won’t be sold off to another company as soon as you close.

Key Features

  • Pre-qualify online
  • Approval process takes 21 days or less
  • Multiple types of construction loans


  • A+ BBB rating
  • Available in 39 states
  • Online account management

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How Constructions Loans Work

A construction loan allows you to build your own home rather than purchasing an existing home. The plus side is that you can design your new house to fit your exact needs on a piece of land you chose on your own. The downside is that getting a construction loan is more complicated than a traditional home loan and not all lenders are willing to do them.

Here’s exactly what you can expect throughout the process to make it as smooth as possible. With some upfront research and preparation, you’ll be ready for any potential bumps in the road before they even occur.


When you opt for a construction loan, the approval process doesn’t just involve you, it also involves the team working on your new home. You’ll need to supply your lender information on the general contractor and maybe even subcontractors. The lender will then likely run a credit check on those parties, as well as checking to make sure they’re appropriately licensed for the job. They may also check out the house plans to review the size, building materials, and other details of your floor plan.

As a borrower, you’ll need to undergo a personal credit check yourself and also have substantial savings. That’s because you’ll not only need to make payments on your new home as it’s being built, you’ll also need to keep up with your current rent or mortgage payments if you’re not staying with family while you build.

Check on these financials requirements in advance to make sure you understand the full involvement that comes with a construction loan. There are options for bad credit borrowers with limited cash on hand for a down payment, but those are harder to come by. Start the process early and talk to a lender that specializes in construction lending as soon as possible before you even start working with a builder. You don’t want to spend money on consulting fees with a builder and then realize that the construction process doesn’t work for your financial situation.

Inspection Process

The inspection process with a new construction home is a much more in-depth one than with a normal home purchase. When you buy an existing home, you go through one inspection and then finalize negotiations with the seller to address any concerns before you go to closing.

The inspection process with a construction loan has several steps, so be prepared before you even get started building.

Since the lender is financing a project as it’s being completed, inspections will be done at specific intervals to ensure the work is being done and is on schedule. The lender releases payments as different milestones are completed. Examples of milestones include:

  • Loan closing
  • Lot grading
  • Framing

The builder then receives a payment that is drawn on the loan in order to have the funds to keep moving forward with the project. An inspector comes to review the progress on behalf of the lender and report back to make sure everything is getting done correctly. This role in project management protects both the lender and you as the borrower since the building company knows they won’t get paid until they complete certain stages of the construction.


A construction loan is structured differently than a regular home loan so don’t be alarmed if you see higher interest rates. In fact, you can definitely expect to see higher rates because of the additional risk involved for the lender and because of those extra steps necessary to complete the inspection process.

You’re also likely to see variable interest rates that can change if the prime rate increases or decreases during your term. It’s possible, although not always common, to find a lender willing to offer a fixed rate construction loan.

The good news is that whatever option you find, the construction loan won’t last as long as a traditional mortgage would. In fact, the most common term is just one year, and then you would refinance to a traditional 15- or 30-year mortgage. Plus, you’ll only pay interest on the amount of cash that is disbursed to your contractor.

The final financial consideration is your down payment. Working with a construction loan lender will very likely result in a higher down payment requirement. If you already own your land, you may be able to put down just 10%, otherwise you’ll likely need a 20% down payment.

You can also make a higher down payment than requested in order to save on your interest rate. If you’re able to make the financial commitment, it may be worth the long-term savings to lower your interest rate, even if by just a fraction of a point. Look into how long it would take you to make up the extra savings and see if it’s worth parting with that extra cash up front.


Once the construction of your home is complete, your construction loan will convert to a regular mortgage. You don’t have to worry about going through another approval process; that is done as part of the construction loan approval. You also won’t face any new closing costs as you switch from construction to regular mortgage. The new payments, however, do include both interest and principal payments, plus other costs like real estate taxes and homeowner’s insurance.

Don’t forget to plan for unexpected hurdles throughout the construction process. A healthy budget padding can come in handy more often than not.

If you’ve ever worked on a large home project before, you know that it’s rarely a straight line from start to finish. This is especially true when you take on a project as large as a new home. Your schedule can get slowed down from any number of issues, such as:

  • Bad weather
  • Unreliable subcontractors
  • Slow lead time on building materials

Even the best general contractor can’t control these issues, so do be prepared for adjustments to your completion date. But if you’re willing to take the risk and have the ability to have a financial buffer, building your own home comes with a host of benefits.

Frequently Asked Questions

How much do you have to put down with a construction loan?

This varies depending on your lender, but in most cases, you’ll need to put down a full 20%. This is quite a bit more than what is required of a traditional mortgage. If you already own land, you may be able to get by with a smaller down payment.

Can you use the value of your land as a down payment?

Yes, if you own your land already, you may be able to reduce your down payment requirement from 20% to just 10%. Talk to your lender early on in the process to get an exact number for your situation.

How long does it take to get approved?

The approval process for a construction loan can take longer than a regular mortgage. Many lenders estimate an extra 10 days. Every lender is different, though, so this should be part of your criteria when considering different construction lenders.

Is there any risk with this type of home loan?

Yes, there’s always a risk when building a new home, which is why lenders typically charge higher interest rates.

Find a lender for your construction loan today!

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by Lauren Ward

Personal Finance Writer

Lauren Ward is a personal finance writer with nearly ten years of experience covering topics like loans, credit, and real estate. She lives in Virginia with her husband and three children.

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