As there is no collateral to back up a construction loan—like there is for a traditional mortgage—you should expect some additional obstacles before you are approved for a loan. Your architectural plans, your builder, and your finances will all be thoroughly inspected. You should also be aware that the disbursement of a construction loan is different from a traditional loan. Construction loans are paid out to the builder in installments—called "draws"—that correspond with important phases of the project, i.e. pouring the foundation, framing, and finishing work.
If you're looking to remodel your house, but you aren't sure how to fund your dream house, a renovation construction loan may be the answer for you. With this loan, you can figure upgrade and repair costs into your permanent mortgage. The amount you can borrow will depend on the estimated value of your home after the repairs and upgrades have been made. Our lenders will need to approve your contractor and renovation plans first, and the money will also be paid out in installments. Unlike a personal loan or a home equity line of credit, construction loans generally have lower interest rates and longer repayment periods.