Funding Options for Building and Home Construction |

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The short-term interim loan that is typically used to finance the construction of buildings and homes is a construction loan. A construction loan is a type of loan that provides funding for the construction of a new building or the renovation of an existing one.

Construction loans are short-term loans, usually with a term of one year or less, and are typically paid back in installments as the construction progresses. The loan amount is based on the estimated value of the completed project, rather than the current value of the property.

Unlike a conventional loan or an adjustable-rate mortgage, which are typically used to purchase an existing home or property, a construction loan is designed specifically for construction projects. The loan may be provided in phases, with each phase of the project requiring a separate draw from the loan.

To obtain a construction loan, borrowers typically need to provide detailed plans and cost estimates for the construction project, as well as proof of their ability to repay the loan. This may include evidence of income and assets, as well as credit and employment history.

In summary, a construction loan is a short-term interim loan that is specifically designed to finance the construction of buildings and homes. Unlike conventional loans or adjustable-rate mortgages, which are used to purchase existing properties, construction loans are based on the estimated value of the completed project and are typically paid back in installments as the construction progresses.