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Homeowner’s Guide to Construction Loans


Owning your own home is considered the seemingly elusive American Dream, but the dream can be real for you no matter what your circumstances are. Some Americans dream of keeping inherited homes that have been in the family for hundreds of years, and some Americans dream of building their own inheritance from scratch in a new home.

This dream is real for over a million Americans. The National Association of Home Builders reports that there was 1.3 million new private housing offered in the United States in 2018.

Start dreaming of pouring your own cement after learning everything you need to know about homebuilder construction loans here.

Are Owner Builder Construction Loans Mortgages?

The quick answer to this very common question is no. When you dream of building your own house, you will learn it early in the process.

To build and live in your own house, you will get a total of two loans. You will probably have to go through the bank to get them, but some construction companies offer their own forms of financing.

Some will even cover your mortgage and charge you for the next 20 years instead of a bank.

But for the most part, you will get two loans. One will be for the construction of the house and will be received through a draw period for the builder.

The second loan will be what is called the “final loan” and will be the conventional financing you would get when buying a home, such as a 20 or 30 year mortgage.

You will go through a separate qualification process for each loan.

Whether you have good credit, bad credit, or a complex income to prove, there is construction loan (s) for you.

Finance the dream in these 5 easy steps

Now that you know the basics of the homebuilder construction loan process, follow these simple steps from loan applications to moving day.

First, you will do your research on home builders. When you apply for a loan from the bank, they will want to know all the details of every corner of your new home and who is building it.

You want licensed contractors with experience.

The second step is to apply for the construction loan. Make sure you have all of your financial information.

For complex situations, have three to six months of bank statements. All your lender wants to see is that you have money in the bank. A savings reserve is useful.

Once this is approved, the third step is to build the house. The construction loan will go to the builder in a series of “drawings” or installments.

Each print is received after a certain stage of construction, such as the pouring of the foundation. You and your lender will negotiate this with your builder.

Fourth, once the house is built, the next step is to get your mortgage. After that, it’s step number five: fall asleep in your brand new dream home with the scent of fresh paint.

Start planning your dream home today

Over one million new homes are built in the United States each year. Due to advancements in technology and awareness, new home construction today is also being built to a higher standard than it has ever been in history.

Before 1970 for example, energy efficiency requirements in new homes simply did not exist. Today, all states except California use the International Universal Energy Conservation Code in new home construction.

This is why the construction of new homes today takes longer than it has in history. This is about making sure that your dream is built correctly and lasts, from scratch. Millions of people do it every year, but you don’t need millions to get the ball rolling.

Join the millions of Americans today who are planning their dream home from scratch, so you can build the best quality home for their family’s legacy today. Find out how easy it is to apply for and get construction loans for new homeowners in Arizona right here on our site.