Construction Loans in Arizona & Texas
Financing built around the timeline of building a new home, from breaking ground to move-in day.
What Is a Construction Loan?
A construction loan is short-term financing that pays for building a new home in stages, rather than handing over the full amount at closing like a standard mortgage. Here at Efinity Mortgage, we typically use a construction-to-permanent structure, so you close once and your loan automatically converts to a standard mortgage once the home is finished.
Who Construction Loans Are Often a Good Fit For
- Buyers building a custom home with a licensed, approved builder (the buyer can't act as their own contractor)
- Buyers who can put down 20% or more, or as little as 10% with FHA construction financing
- Buyers with cash reserves on hand to cover 3 to 6 months of payments
- Buyers with an established credit history
Down Payment & Credit
Construction loans generally require a larger down payment than other loan types, typically ranging from 20% to 30% depending on your credit score. FHA construction financing is an exception, with down payment options as low as 10%.
Along with your down payment, most construction loans also require cash reserves, generally enough to cover 3 to 6 months of payments, to show you can cover the loan if costs shift during the build.
One-Close vs. Two-Close Options
Construction loans are generally structured one of two ways: a single-close loan, where your construction financing and permanent mortgage close together as one loan, or a two-close loan, where you close on the construction loan first and close again on a separate permanent mortgage once the home is finished.
FHA construction loans are only available as a single-close option. Learn More About FHA Loans
How the Draw Process Works
Instead of receiving the full loan amount upfront, funds are released in stages, known as draws, as each phase of construction is completed and verified. You typically pay interest only on the amount that's been drawn so far during the build, which usually runs about 9 to 12 months.
Is a Construction Loan Right for You?
Every project is different. Reviewing your building plans, builder, budget, and financial picture together is the best way to know whether a construction loan fits what you're trying to do.
Common Questions
How much down payment do I need for a construction loan?
It generally ranges from 20% to 30% depending on your credit score, though FHA construction financing offers options as low as 10% down.
What credit score do I need?
Construction loans generally call for a stronger credit profile than a standard purchase loan, so it's worth reviewing your specific situation together.
Do I make full mortgage payments during construction?
Generally no. Most construction loans are interest-only during the build, based on the amount that's been drawn so far.
What's the difference between a one-close and two-close construction loan?
A single-close loan combines your construction and permanent financing into one closing. A two-close loan means closing twice, once for construction and again for the permanent mortgage. FHA construction loans are only available as single-close.
Can I act as my own builder?
No. Construction loans require a licensed, approved builder to complete the project. The buyer can't build the home themselves.