In short
A construction loan finances a home while it's being built, releasing money in stages called draws as the work progresses. When construction is finished, the loan moves to permanent financing. It's for borrowers building a home who need both construction financing and a plan for their permanent mortgage.
Reviewed by Ron Pippin, NMLS #218333 · Last updated October 21, 2026
How does a construction loan work?
A construction loan pays for your home as it's being built. Instead of handing over the full amount at once, the money is released in stages, called draws, as the work gets done. While the house is under construction, you'll have payments to make based on how that specific loan is set up. When the build is finished, the loan moves to permanent financing, which is the mortgage you'll pay going forward. Lenders handle each of these pieces differently, so I compare options and walk you through the draws, the payments during construction and the transition to permanent financing before you start. Your rate depends on your scenario and the day's market. Reach out and I'll price it for real.
Key takeaways
Building a home is a bigger project than buying one, and the financing is too. You need money to pay for the build as it happens, and you need a plan for the permanent mortgage you'll live with once the house is done. I'll help you match the financing to your land, your builder, your budget and your timeline here in Ogden. Before construction begins, you'll understand how draws work, what you pay during the build and how the loan moves to permanent financing. No guesswork. No closing-day surprises.
Building a Home in Ogden, UT
Building gives you a home designed around how you actually live. It also adds moving parts. There's the land, the builder, the plans, the budget, the schedule and two kinds of financing: the money that pays for the build, and the permanent mortgage you'll have when it's done.
My job is to help you put a financing plan together that fits the build, and to make sure you understand it before construction begins. I spent 10 years as an engineer before I got into mortgages, so I like a good plan. A construction loan is where a plan matters most.
Start With the Four Pieces
Every construction loan comes back to the same four things. I'll look at each one with you:
- Your land. Whether you already own it or are buying it, the land is part of the financing picture.
- Your builder. Lenders review the builder and the build. It helps to know early what they'll want to see.
- Your budget. What the project costs, what you're bringing to the table and what the finished payment will look like.
- Your timeline. How long the build is expected to take and how that lines up with the loan.
The reason why I'm asking about all four up front is simple. A gap in any one of them can slow things down later. It's much easier to sort it out before construction starts than in the middle of it.
How Draws Work
A construction loan doesn't pay out all at once. The money is released in stages, called draws, as the work progresses. That protects you and the lender, because funds go out as the home actually gets built.
The details vary by lender and by loan. I'll explain how draws work on the options we look at, so you and your builder know what to expect at each stage.
Payments During Construction
You'll likely have a payment while the house is being built, and it may look different from the mortgage payment you'll have once you move in. I'll show you how payments work during construction on your loan, so you can plan for them alongside your current housing costs.
What payment will work for you? That's a question for the build and for after. You need room in your budget for both.
The Move to Permanent Financing
When the house is done, your financing moves to the permanent mortgage you'll pay going forward. How that transition happens depends on the loan. I'll walk you through it before you start, so you know what the permanent payment looks like, including taxes, insurance, any mortgage insurance and HOA dues.
This is the part people tend to leave until the end. I'd rather you understand it on day one.
Why Work With an Independent Broker
Construction financing is not one-size-fits-all, and different lenders can look at the same project and come back with very different answers. As an independent broker, I have multiple options. I compare offers from multiple lenders, and if one lender's rules don't fit your project, I have somewhere else to look.
I've spent nearly 30 years in mortgages, including time inside banks and large mortgage companies. I'll explain why I recommend a loan, what you give up or gain with each choice, and tell you honestly if something doesn't make sense.
Let's Run Some Numbers Together
Whether you're still looking at lots or you already have plans from a builder, it's not too early to talk. Call or text me, tell me about your build, and let's see what we can do.
This page is general education only. It is not an offer or commitment to lend, and nothing here reflects current interest rates. Construction loan availability, guidelines and terms vary by lender and change over time. Call or text me for details that fit your project.
Quick facts
- What it finances
- Building a home, paid out in stages
- How funds are released
- Draws as construction progresses
- After the build
- Moves to permanent financing
- What I match it to
- Your land, builder, budget and timeline
- Your rate
- Depends on your scenario and the day's market; call or text for real pricing
Is this loan right for you?
Who it's for
- Borrowers building a home who need financing for the construction itself
- People who already own land, or are buying land, and are working with a builder
- Anyone who wants a plan for the permanent mortgage before construction begins
- Borrowers who want draws and payments during construction explained in plain English
Who it may not fit
- Buyers purchasing a home that's already built (a standard purchase loan fits better)
- Buyers fixing up an existing home, who may want to look at a renovation loan instead
- Anyone whose budget only works if the build comes in perfectly on time and on cost
Pros and cons
Pros
- Lets you finance a home built around how you want to live
- Money is released in stages as the work gets done
- A clear plan for the move to permanent financing before you start
- Comparing multiple lenders gives you more ways to fit your land, builder and timeline
Trade-offs to weigh
- More moving parts than a standard purchase loan
- Lenders review the builder and the project, which can add steps
- You may be paying during construction while also covering your current housing
Frequently asked questions
How is a construction loan different from a regular mortgage?
I'll tell you the difference. A regular mortgage pays for a home that already exists, all at closing. A construction loan pays for a home as it's built, releasing money in stages as the work is done. You also need a plan for the permanent mortgage you'll have once the house is finished.
What are construction draws?
Draws are the payouts made during the build as the work progresses. Instead of releasing the full loan amount up front, funds go out in stages. The details vary by lender, and I'll walk you and your builder through how it works on your loan.
Will I make payments while my home is being built?
In most cases you'll have some payment during construction, and it may look different from your permanent mortgage payment. I'll show you how payments work during the build on the options we compare, so you can plan for them alongside your current housing costs.
When should I talk to you about a construction loan?
Early. Ideally before you commit to land, a builder or a set of plans. Your land, builder, budget and timeline all affect the financing, and it's much easier to line them up before construction starts.
What will my rate be?
Your rate depends on your scenario and the day's market. Reach out and I'll price it for real, and I'll explain how the financing works during construction and after.
Related loan programs
Before you rule yourself out, let's run some numbers together. Strategic Mortgage compares multiple lenders and checks down payment assistance before you start shopping.
FHA financing offers more flexible credit and qualifying requirements, starting with a 520 or better credit score. Strategic Mortgage compares it with your other options.
I help eligible veterans, service members and surviving spouses use their VA benefit with a clear look at entitlement, funding fees, closing costs and the full payment.
Last updated October 21, 2026 · Reviewed by Ron Pippin, NMLS #218333. This page is educational and not a commitment to lend; program details change — ask for current figures.