More and more people are dreaming about building their perfect home instead of trying to compete in the traditional housing market. And honestly—I get it. There’s something really special about watching your home come to life from the ground up. If building is on your radar, winter is usually when early planning begins. So, I wanted to break down the basics of construction loans in a way that’s personal, clear, and easy to understand.
What Makes a Construction Loan Different?
Unlike a traditional mortgage, which gives you the full loan amount at closing, a construction loan pays out in stages, called draws.
These draws happen as each phase of the build is completed:
- Foundation
- Framing
- Plumbing and electrical
- Finishes
- Final touches
You submit draw requests to the title company of your choosing, and the bank pays as the work is inspected and approved.
You Only Pay for What’s Been Built
One of the biggest advantages is that you only pay interest on the amount that has actually been disbursed—not the full loan amount right away.
For example:
If your total construction loan is $400,000 but only $60,000 has been drawn to pour the foundation, you’re only paying interest on that $60,000.
This helps keep early payments much more manageable.
Pre-Approval Still Matters (A Lot!)
Even though the home doesn’t exist yet, you still need to be approved for:
- The total cost of the project
- Your permanent mortgage terms
- Your builder’s qualifications
I always recommend reaching out early in the process so we can review your budget, expected payment, and what you’re comfortable with before the plans go too far.
Choosing the Right Builder Is Crucial
I can’t emphasize this enough:
A good builder makes building a home exciting. A bad one makes it stressful.
Look for a builder who:
- Is licensed and insured
- Has solid references
- Has experience with your type of home
- Communicates clearly and consistently
If you need help evaluating whether a builder is lender-approved, I’m happy to walk through that with you.
Plan for the “Extras”
Even the best-planned builds have surprises—weather delays, material changes, upgrades you fall in love with, etc. Making sure you have a little flexibility in both your timeline and your budget helps the process go more smoothly.
Building a home is an incredible experience, and the right financing can make all the difference. If you’re thinking about building in 2026, I’d love to help you understand the process, review your options, and make sure everything feels clear from the start. You can call me, Kaylee Hamling, Mortgage Loan Officer at Sentinel FCU, or send me an email and I will get back to as soon as possible!
