Construction loans, also known as construction financing, are short-term loans typically ranging from six months to two years, depending on the project’s timeline. They are designed to cover the costs associated with building or converting real estate projects — whether it’s individuals building their dream home or businesses developing large-scale projects like high-rises or subdivisions.

These loans can fund every stage of a real estate project, including land acquisition, site preparation, permits, foundation work, framing, utilities, landscaping, professional fees, contingency reserves, and more.

Securing a construction loan requires detailed documentation, including a comprehensive development plan, as lenders need to assess the project’s viability and associated risks. At Krimson Mortgages, we work closely with you to ensure all necessary paperwork is prepared and submitted correctly, increasing your chances of a smooth approval.

Construction loan funds are typically disbursed in stages — known as “draws” — based on specific milestones being met (e.g., completion of the foundation). Each stage requires an inspection to verify that the work is completed before the next release of funds. Initial costs such as land purchase and permits often need to be covered upfront, as the first draw may not be immediately available. After project completion, a final inspection ensures the work matches the approved plans.

Due to the higher risks involved, construction loans usually come with higher interest rates than traditional mortgage loans. During the building phase, you typically pay interest-only installments, and interest applies only to the amount drawn, not the full loan amount.

Once construction is complete, the loan is usually converted into a standard residential or commercial mortgage — a process called construction-to-permanent financing, which may require another round of financial approval to confirm your eligibility.

Navigating construction loan approvals can be complex and time-consuming. However, with Krimson Mortgages by your side, you’ll have expert guidance every step of the way. We help dozens of individuals and businesses secure construction financing every year, connecting them with the best lenders and products on the market to make their real estate dreams a reality.