4 Best Construction Mortgage Lenders
Not every mortgage provider offers construction loans. We've chosen home construction lenders that rank among the best in several categories.
Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page. Our opinions are our own. Here is a list of our partners.
Building a house or buying a house that's under construction — rather than purchasing an existing home — provides an opportunity for some personalization. But it comes with a challenge. You'll need to think about financing the building phase as well as the completed home.
If you are buying an unbuilt home that's in a development, there's a good chance you'll be offered financing by the developer. That doesn't mean you can't compare your options to see if you could get a more favorable interest rate or better terms. And if you're building a home outside of a development, finding an experienced and accommodating home construction lender is essential. NerdWallet has chosen these construction mortgage lenders as standouts.
Best Construction Mortgage Lenders
- Offers a wide range of loan types and products, including FHA, VA and USDA.
- Borrowers can apply and track loan status online.
- Offers customized online rate quotes with monthly payment estimates, including mortgage insurance, when applicable.
- Home equity loans are geographically limited.
- Origination fees are on the high side compared with other lenders, according to the latest federal data.
- Offers a full line of conventional and government loan products.
- Provides home equity loans and lines of credit.
- Allows borrowers to apply and track their loan's progress online.
- No personalized mortgage rates available online.
- Published mortgage rates assume an above-average credit score.
- Offers specialty loans, such as construction and renovation loans and loans for second homes and investment properties.
- Participates in first-time home buyer assistance programs in Illinois, Indiana and Wisconsin.
- Sample rates for some loan products are available only by contacting a loan officer.
- Physical locations aren't available in all states.
- Offers a complete suite of online mortgage application tools and loan tracking.
- Sample rates are easy to find on the website.
- Offers a wide variety of loan options, including construction loans and programs for doctors.
- Customized rates aren't available online without starting an application.
- For borrowers who prefer to apply in person, branches are limited mostly to the South and East.
What type of loan is best for building a house?
While a traditional mortgage finances buying a house, a construction loan provides money for building a house. Construction loans have shorter terms and higher interest rates than traditional mortgages. The lender pays the loan proceeds in installments to the contractor as building progresses. Once the home is completed, the construction loan is paid in full or converted to a permanent mortgage.
Types of construction loans
There are a few types of home construction loans:
A construction-to-permanent loan, also known as a "single-close" construction loan, becomes a permanent mortgage when the home is complete.
A construction-only loan, also known as a "two-close" loan, is paid off when building is finished. Unless you have ample cash to pay off the loan, you'll need to shop for a traditional mortgage during the building process.
Renovation construction loans include the cost of major renovations in the mortgage. The total loan amount is based on the value the home will have once the construction work is done.
Is a construction loan harder to get than a traditional mortgage?
Getting approved for a construction loan is generally more difficult than getting approved for a traditional purchase mortgage because there isn't a completed house to secure the loan during the building phase. A typical down payment is 20%, although a lower down payment may be allowed with some programs. Credit score requirements vary by type of loan and lender. A credit score of 720 or above is typically sufficient.
If you are buying a home that's being built by a developer, rather than a builder you've hired on your own, the developer will likely offer you either direct financing or a loan through a lender they've partnered with. While working with the developer's preferred lender may make parts of the process easier, it's worth comparison shopping different construction loans to make sure that you aren't trading considerable cash for a bit of convenience.
More from NerdWallet
Last updated on May 1, 2023
Methodology
The star ratings on this page reflect each lender's overall star ratings. Read more about how we determine those ratings.
The lenders on this page are chosen using this methodology:
NerdWallet reviewed more than 50 mortgage lenders, including the majority of the largest U.S. mortgage lenders by annual loan volume (measured among lenders with at least a 1% market share), lenders with significant online search volume, and those that specialize in serving various audiences across the country.
For inclusion in this roundup, lenders must originate construction loans to build a house, offer information about construction loans on their websites, and achieve at least an overall 4.5-star rating from NerdWallet.
NerdWallet solicits information from reviewed lenders on a recurring basis throughout the year. All lender-provided information is verified through lender websites and interviews. We also used 2021 HMDA data for origination volume, origination fee, average interest rate and share-of-product data.
NerdWallet's Best Construction Mortgage Lenders
- Flagstar: Best for rate transparency
- US Bank: Best for jumbo lending
- Wintrust Mortgage: Best for first-time home buyers
- Truist: Best for construction-to-permanent
