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A construction mortgage lets you finance both the purchase of land and the building of your new home. Unlike a traditional mortgage, the funds are released in stages, known as draws. As each stage of construction is completed and inspected, your lender releases a portion of the total loan to pay for construction costs.
This staged funding gives you control over your home’s design, materials, and construction quality while keeping your financing aligned with actual progress.
Land or Start Stage :This is the first step. It happens when you have the land ready, and construction begins. The lender gives money for the land or the first work, like digging and laying the foundation.
Foundation and Structure Stage :After the foundation is done and the frame of the house is up, the next part of the money is given. This helps pay for bigger building work.
Lock-Up / Roof Stage: When the house has walls, a roof, windows, and doors, it becomes weather-tight. This means it is protected from rain and wind. Once it’s checked, the lender releases the next draw.
Interior Work Stage: This stage is for work inside the house, like plumbing, electrical, drywall, and other interior jobs. After the work is finished and inspected, more funds are given.
Final or Completion Stage: At this stage, the house is almost ready to move into. The lender does a final check. When everything is approved, the last funds are released, and your mortgage changes into a regular home loan.
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Because the burden to prove eligibility is greater on self-employed individuals, it pays to be well prepared before applying for a loan. The following should be considered before going into apply for a Self-Employed Mortgage:
Lenders give parts of your loan after each stage of construction is checked. When your home is finished, the loan changes into a regular mortgage.
You will need proof of income, a good credit history, and a signed contract with your builder. The contract should show the total cost and timeline. Lenders may also check your assets and make sure you can cover costs between payments.
