Construction loan
A short-term mortgage that funds the building of a new home before it exists. The lender doesn't release the full amount at once — instead, funds are disbursed in stages called draws as each phase of construction is completed and inspected. During construction you pay interest only on the amount drawn. When construction is complete, the loan either converts automatically to a permanent mortgage (single-close / one-time close) or you refinance into a separate permanent loan (two-close). USDA, FHA, and conventional programs all offer construction loans with different down payment and eligibility requirements. How construction loans work →