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Whether you're in the process of constructing a residential/commercial facility or a large-scale development project, construction financing is the foundation that keeps these projects flowing. Unlike traditional mortgages, construction loans are tailored specifically for the unique risks and requirements of building from the ground up. Construction financing, short & long-term loans are used to cover the costs of building or renovating a property and typically last the duration of the construction project. Upon project completion, construction loans are replaced by long-term financing (like a mortgage) once the build is complete.

Two main types of loans:

• Construction-to-permanent loan: Converts into a permanent mortgage once construction is complete.
• Stand-alone construction loan: Requires a separate loan to pay off the construction loan once the build is finished. 

Common Parties who need construction financing:

• Homeowners building custom homes
• Real estate developers launching residential or commercial projects
• Businesses constructing or expanding facilities

What’s Most Important to the Lender (Banks):

• Strong credit score and financials
• Detailed construction plan and cost estimate
• Qualified builder or contractor

Tips for Navigating Construction Financing

1. Get pre-approved early: Understand your borrowing limits and get your paperwork in order.
2. Choose the right lender: Look for banks or credit unions experienced in construction lending.
3. Monitor the budget: Costs can creep up—have a contingency buffer (typically 10–15%).
4. Communicate regularly with your builder and lender to keep the project on track.

Construction financing can be complex, but with the right planning and partners, it can make your dream project a reality. Whether you’re a first-time builder or a seasoned developer, understanding how construction loans work will help you minimize risks and stay on budget from blueprint to move-in.