The Best Construction Loan Lenders of 2024

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Building a new house can be a great experience with the right financing. The best construction loan lenders can help home buyers build and finance the home of their dreams.

Finding the perfect home isn’t always easy, especially for home buyers with very particular tastes. After months of searching through listings and attending open houses, prospective buyers may be ready to give up. If they’re not having much luck with the housing market, home buyers have another option to explore: building their dream home on a hand-picked plot of land.

With the help of a construction loan, a home buyer can build a home and finance its purchase with traditional mortgage terms. How do construction loans work, exactly? This type of financing typically covers the major expenses that buyers incur when building a house, including the land purchase, labor, materials, and building permits. In many cases, lenders extend these loans with the expectation that construction will take no more than a year to complete. Borrowers may have the option to extend the construction period, but this isn’t always the case.

Finding a reputable contractor is a key consideration when building a house, but it’s equally important that home buyers find a construction loan company that offers the right terms to fit their needs. The best construction loan lenders can support buyers at every phase of the process and help them build the perfect home.

1. BEST OVERALL: Flagstar Bank
2. RUNNER-UP: Nationwide Home Loans Group
3. BEST FOR FAIR CREDIT: FMC Lending
4. BEST ONLINE EXPERIENCE: Go Mortgage
5. BEST FOR SELF-BUILD HOMES: Normandy
6. ALSO CONSIDER: TD Bank

What to Consider When Choosing One of the Best Construction Loan Lenders

The best construction loan providers can offer a wide variety of benefits to consider, but not all lenders will be the right fit for every home buyer. Prospective borrowers may want to prioritize factors that affect availability, loan options, and cost, among other considerations. When vetting the best construction loan companies, buyers will likely find that some companies specialize in construction loans, while others offer this type of financing in addition to traditional mortgages. Finding the right lender for every situation will require a thorough assessment of each candidate’s capabilities and how those strengths match a buyer’s top priorities.

Coverage Area

The first consideration that many buyers may want to weigh is a construction lender’s service area. Some companies have a nationwide footprint, operating in every state in the country. However, other lenders may have much smaller coverage areas, providing construction loans to select states or regions. Checking mortgage companies’ service areas can be a good way to quickly narrow down the list of potential candidates so only viable lenders are in the running. If a construction loan lender doesn’t service the specific location where a buyer is planning to build a house, then that company can be removed from consideration.

Loan Type

Lenders may offer a few types of construction loans that can appeal to different borrowers depending on their circumstances. The most common type of financing that buyers are likely to encounter is a construction-to-permanent loan. These loans are structured to support both the build and the home purchase. Here’s how a construction loan works with this particular type of financing: The first phase of the loan covers the construction period, which may run anywhere from 6 to 12 months—or potentially longer in some cases. During this time, the borrower will often only be required to pay interest on the loan. When construction is complete, the loan will convert into a mortgage that will be paid off in full over an extended period of time. Loan terms typically mirror traditional fixed-rate mortgages, running either 30 years or 15 years.

In some cases, buyers may also find lenders that are willing to finance self-build homes, which means the borrower handles construction themselves without working with a third-party builder. Lenders usually prefer to extend loans to borrowers who have separate contractors, though, so this type of home builder financing is relatively uncommon.

Lenders may also offer construction-only loans; as the name suggests, these loans exclusively cover construction costs. Once the home has been built, the borrower will need to take out a second loan to finance the home purchase. As such, buyers will need to go through the loan application and approval processes twice—not to mention pay two sets of closing costs and lender fees.

There’s also a third option that may be available: renovation loans. Although they fall under the category of construction loans, renovation loans can only be used with existing structures. If a buyer finds a listing that’s in the perfect location but the house itself has fallen into disrepair, they can use a renovation loan to finance the purchase of the home as well as any repair work that needs to be done to restore it to its former glory and make it habitable again.

Depending on what type of financing a buyer is looking for—construction-to-permanent, construction-only, or renovation—they may be able to further cull their list of potential candidates by nixing lenders that don’t offer the right kind of home construction loan.

Minimum Credit Score

Construction loans can present greater risk for lenders compared with traditional mortgages. This is because loan providers are financing not only the purchase of a home but its construction as well. With that in mind, many lenders set more rigid standards for borrowers to meet in order to qualify for a loan. In particular, buyers may find that they will need a higher credit score to secure a construction loan than they would if they were to go out and apply for a mortgage. Lenders typically look at FICO scores—three-digit credit scores ranging from 300 to 850—when reviewing an applicant’s credit history.

Lenders may be more likely to require borrowers to have good or even exceptional credit to qualify for a construction loan. Minimum credit score requirements will vary from lender to lender—and in rare cases, lenders may not have minimum requirements at all—so it can be a good idea to check credit score requirements before applying for a construction loan.

Maximum Loan-to-Value (LTV)

Loan-to-value (LTV) is an important factor that lenders consider when deciding whether or not to extend a loan to a potential borrower. LTV compares the size of the loan to the expected value of the property. Borrowers can lower their LTV by agreeing to make a larger down payment, increasing their initial equity and reducing the size of the loan amount.

Using this calculation, lenders can get a better sense of how risky a particular loan may be. Higher LTV ratios indicate that the lender is taking on more financial risk because the borrower is putting less money forward for a down payment. That, in turn, could suggest that the borrower may lack the finances necessary to keep up with their mortgage payments and repay the loan amount in full. As such, lenders may set maximum LTV ratios for buyers to qualify for a construction loan. Conversely, borrowers who present lower LTV ratios may be able to secure more favorable loan terms, including lower interest rates. When vetting construction loan lenders, buyers may want to look at any maximum LTV requirements in place and think about how their down payment will affect their own LTV ratio.

Eligibility Requirements

Beyond credit scores and LTV ratios, there may be other eligibility requirements that borrowers need to meet in order to qualify for a construction loan. For instance, lenders may request proof of income to verify that the borrower will be able to make their monthly payments and repay their loan as outlined in the amortization schedule. The amortization schedule lays out when all payments will be due and what amount is owed with each payment.

When vetting prospective borrowers, lenders will review any existing debt to get a better understanding of the applicant’s ability to manage and repay debt. To that end, debt-to-income (DTI) ratio can be an important factor that lenders weigh when deciding whether to extend a loan. DTI compares the amount of monthly debt payments a person owes with the amount of income they bring in each month. Buyers with high DTI ratios may not qualify for a construction loan, but these requirements vary from lender to lender.

Interest Rate

When considering the total cost of a construction loan, borrowers will likely want to take a close look at their interest rate. Construction loan rates can be fixed or variable, which can have a major impact on the amount of interest that the borrower pays over the life of the loan. Fixed rates never change, so borrowers pay the same amount each month until the loan is repaid. Variable interest rates may go up or down depending on changes to prevailing mortgage rates. As such, borrowers may see their monthly payment change from year to year, and they may wind up paying more interest with a variable rate than if they had locked in a fixed rate.

In general, construction loans tend to come with higher interest rates than traditional mortgages on account of the lender’s added risk. Until the home is built, there’s no collateral for the lender to attach to the loan, so they’re likely to charge more interest to offset that risk. Some lenders may offer lower interest rates compared with other providers, though, so it’s likely worth a home buyer’s time and energy to shop around and compare rates.

Down Payment

Borrowers may find that they need to put down a certain amount of money as part of their down payment to qualify for a construction loan. It’s not unusual for lenders to require down payments as high as 20 percent to 25 percent of the anticipated value of the home once it’s built. That being said, lenders rarely publish minimum down payment requirements because they often consider each applicant’s total risk profile on a case-by-case basis. Borrowers who present less risk overall may be able to secure a loan with a lower down payment.

Buyers could take advantage of lower down payment requirements by working with lenders that provide new home construction loans through government programs. Some government-backed construction loans, such as VA construction loans, have no down payment minimum at all. For home buyers who are concerned about affording the initial up-front cost of a down payment, it can be important to explore all financing options.

Construction Period

Arguably the most commonly used construction loan is the construction-to-permanent loan because it streamlines and simplifies the entire financing process. Rather than take out two separate loans to first cover the costs of building the house and then finance its purchase, buyers can use a construction-to-permanent loan for both expenses. As noted, these loans are split into two phases: the construction period and the mortgage period. Many construction loan lenders will stipulate that the construction period take no more than 12 months—some financing terms may require even shorter time frames. Other lenders may have no set construction period timetable at all. Home buyers will likely want to factor in their expected construction time frames when deciding on a lender so they can find one that will be amenable to their construction schedule.

Application Process

When searching for the best construction loan lenders, home buyers may want to consider how to apply for a construction loan in addition to factors relating to cost and availability. Lenders can offer a few different ways to apply for a new construction loan, including over the phone, through their website, or directly through a local loan officer. Not all of these approaches will be supported by every lender, however, so it may be worthwhile to look for mortgage companies that can provide the kind of approval process that appeals to a particular home buyer’s preferences. Some borrowers may appreciate the convenience of applying online without ever speaking to a representative or agent, while others may want more direction or hands-on support and insist on working with a loan officer.

Our Top Picks

The best construction loan lenders may offer flexible eligibility requirements, wide service areas, varied loan options, and other benefits to help home buyers build their dream home.

Best Overall

Flagstar Bank

See It

• Coverage Area: 50 states and Washington, D.C.
• Loan types: Renovation, construction-only, construction-to-permanent
• Construction period: 9 to 12 months
• Application process: Agent, phone
• NMLS Unique Identifier: 417490

Pros

• High 89.99 percent maximum LTV option
• High $2 million jumbo loan limit
• One-close adjustable rate mortgage option

Cons

• High minimum credit score requirement
• Escrow waiver required for interest-only payments

Why It Made the Cut: Flagstar Bank provides construction loans in every state, supports high loan-to-value ratios, and offers jumbo loans with high loan limits, making the lender a good choice for many home buyers. Flagstar Bank stands out as a construction loan lender with its nationwide availability, allowing prospective home buyers in every state to apply for financing. Availability even extends to the U.S. Virgin Islands, so buyers can build their dream home in a wide variety of locations. Although borrowers will need to meet the lender’s high credit score requirements, eligible borrowers will find financing terms flexible in other ways. For instance, borrowers can secure a construction loan with an LTV ratio as high as 89.99 percent, which means they may be approved with a down payment that’s only about 10 percent of the total loan amount. It’s worth noting that borrowers who want to pay only interest during the construction period will need to obtain an escrow waiver to qualify for interest-only payments. Escrow waivers are given when home buyers wish to pay homeowners insurance and property taxes separately without using escrow. That being said, home buyers may qualify for high loan amounts that exceed the norm for construction loans. Flagstar Bank also offers jumbo loans with limits up to $2 million, so eligible borrowers will have the financial flexibility to build more expensive homes using this lender. In addition, borrowers could qualify for a one-close adjustable rate mortgage, providing more financing options to consider with their construction loans. An adjustable rate mortgage could be a better fit for some home buyers who prefer the flexibility of a mortgage rate that isn’t locked in place for the next 10 to 30 years.

Runner-Up

Nationwide Home Loans Group

See It

• Coverage area: 50 states and Washington, D.C.
• Loan types: Construction-to-permanent
• Construction period: 12 months
• Application process: Phone
• NMLS Unique Identifier: 411500

Pros

• Specialty in construction loans
• Low 0 to 3.5 percent down payment options
• No down payment required during construction phase

Cons

• Limited construction loan options
• No phone support option

Why It Made the Cut: Nationwide Home Loans Group may be an appealing option for home buyers looking for a lender that focuses exclusively on construction loans while also offering a range of down payment options. Nationwide Home Loans Group distinguishes itself as a company that specializes in construction loans for residential homes. Although the lender only offers construction-to-permanent loans, which may seem limiting to some buyers, that sole focus makes single-close loans a core competency for the organization. As such, borrowers can feel confident that their loan officer will understand the intricacies of obtaining a loan to buy land, build a house, and then purchase that home. Nationwide Home Loans Group also offers a number of flexible down payment options that may appeal to home buyers. Because the lender exclusively works with government-backed construction loans—VA, FHA, and USDA loans—borrowers can take advantage of down payment options ranging from 0 percent to 3.5 percent. Construction loans typically have much higher down payment requirements, so this could present an opportunity to reduce the up-front cost of building and buying a home. Customers may find it difficult at times to speak to a loan officer or company representative, as the website does not list a phone number for borrowers to call for assistance. That may not dissuade home buyers who want to take advantage of the many perks and benefits that Nationwide Home Loans Group has to offer, though. For instance, the lender allows borrowers to hold off on making their down payment until the construction phase is completed, so they have time to plan and budget for that expense.

Best for Fair Credit

FMC Lending

See It

• Coverage area: 50 states and Washington, D.C.
• Loan types: Renovation, construction-to-permanent
• Construction period: 12 months
• Application process: Phone, email
• NMLS Unique Identifier: 874391

Pros

• No minimum FICO score requirement
• No income documentation requirement
• Free online quote available

Cons

• Preapproval unavailable for all construction loans
• Somewhat user-unfriendly website

Why It Made the Cut: FMC Lending offers construction loans nationwide and does not set a minimum credit score for borrowers to qualify for financing, making it a viable option for home buyers with fair credit. FMC Lending stands out among the best construction loan lenders because of its flexible eligibility requirements. Most notably, the lender does not have a set minimum FICO score that borrowers must meet in order to qualify for a loan. It’s possible for home buyers with fair or worse credit to be approved for a construction loan with this company. In addition, FMC Lending does not require prospective borrowers to submit proof of income such as pay stubs or tax returns. Without these restrictions, it can be easier for home buyers with irregular income—entrepreneurs, self-employed workers, and freelancers, for instance—to qualify for financing. FMC’s website can be somewhat difficult to navigate, and prospective borrowers will not be able to get preapproved for a construction loan, only a renovation loan. That being said, borrowers do have the option to get a free online quote through the site, which is pretty rare among construction loan lenders. It’s also worth noting that FMC Lending has a nationwide footprint, so home buyers can get a construction loan to build their home in virtually any location in the country.

Best Online Experience

Go Mortgage

See It

• Coverage area: 35 states and Washington, D.C.
• Loan types: Construction-to-permanent
• Construction period: 12 months
• Application process: Online, phone
• NMLS Unique Identifier: 1018

Pros

• Low 0 percent to 3.5 percent down payment options
• Convenient loan management via mobile app
• Easy online preapproval available

Cons

• Limited construction loan options

Why It Made the Cut: With a straightforward online preapproval process and an easy-to-use mobile platform to manage loans, Go Mortgage may appeal to home buyers looking for a digital-focused construction loan provider. Go Mortgage is focused on creating a convenient digital experience for its customers. Borrowers can get preapproved for a loan entirely online without ever needing to speak to a loan officer. This online preapproval process may be more convenient for home buyers who prefer using online channels to sitting down with a loan officer. Once their loan is approved and funded, borrowers can manage their construction loan using the company’s dedicated mobile app. They can schedule payments, check the status of loans that are in process, upload required documents such as permits or financial statements, and send a message to their assigned loan officer. The app provides a one-stop shop for borrowers to keep tabs on their loan and check its status. Although Go Mortgage offers only one type of construction loan—construction-to-permanent financing—every Go Mortgage loan is backed by the VA, FHA, or USDA. These government-backed loans allow the lender to offer down payment options that are significantly lower than those of traditional construction loans. Depending on the government program used, borrowers may not be required to put forward any down payment at all, making it easier for buyers to afford the up-front costs that come with building and buying a house.

Best for Self-Build Homes

Normandy

See It

• Coverage area: 15 states
• Loan types: Renovation, construction-only, construction-to-permanent, self-build
• Construction period: 6 to 12 months
• Application process: Phone
• NMLS Uniq