To get a construction loan, choose a builder first, get plans and a line-item budget, then apply with lenders that do construction lending. For a conventional loan, expect to need about 20% to 25% down (land equity can count) and a credit score of 680 or more; FHA, VA and USDA programs allow far less down.
How to get a construction loan, step by step
- Check your finances. Pull your credit, work out your debt-to-income ratio and how much cash or land equity you have.
- Set a budget. Use the cost calculator to estimate the build, then add land, site work and a 10% contingency.
- Choose a builder. Lenders approve the builder as well as you; see how to choose a home builder.
- Get plans and a line-item budget from the builder, with specifications and a draw schedule.
- Pick a loan type: conventional, FHA, VA or USDA, and one-time or two-time close.
- Apply with two or three lenders that offer construction loans, including local banks and credit unions.
- Appraisal on plans: the lender orders an appraisal of the finished home from the drawings.
- Close and start construction; draws are released after each inspection.
- Convert or refinance into a permanent mortgage when the house is complete.
What documents will the lender ask for?
| From you | From the builder |
|---|---|
| Pay stubs, W-2s or tax returns | license and insurance certificates |
| Bank statements | construction contract |
| Credit authorization | plans and specifications |
| Land deed or purchase contract | line-item budget and draw schedule |
| ID and, for VA, a Certificate of Eligibility | references and, for VA or USDA, program approval |
How long does approval take?
It is usually longer than a purchase mortgage, because the lender reviews the builder, the plans and the budget and orders an appraisal from plans. Start early, ideally while plans are being finalized.
Common reasons construction loans are declined
- Not enough cash or equity for the down payment and contingency
- A builder the lender will not approve
- An appraisal on plans below the project cost
- A budget missing items or with no contingency
- Debt-to-income too high once the new payment is included
More on construction loans
- How construction loans work
- Construction loan rates
- Construction-to-permanent loans
- FHA construction loans
- VA construction loans
- USDA construction loans
- How to get a construction loan
- Construction loan calculator
Sources
- The Lenders Network: Construction loan requirements (updated June 2026)
- FHALoans.com: FHA construction-to-permanent loan (updated July 2026)
- Bankrate: What is a VA construction loan? (last modified July 2025)
- Yahoo Finance: USDA construction loans (April 2026)
Loan terms change often and vary by lender. Nothing on this page is a loan offer or financial advice: confirm current rates, fees and eligibility with lenders before you apply.