Build Your Dream HomeWith Arizona Construction Loans

A construction loan is usually a short-term loan used to finance the building of a new home, with the money typically held in escrow and released in stages — called draws — as construction progresses. A traditional mortgage is a long-term loan used to purchase an existing home, with the full loan amount provided at closing.

A one-time close construction loan (also called construction-to-permanent or single-close) combines your construction financing and permanent mortgage into a single transaction that closes before construction begins. You apply once, close once, and pay one set of closing costs. After construction, the loan becomes your permanent mortgage without a second application or requalification.

There is no official standard — timing varies by lender and project. Because a one-time close underwrites the construction and permanent loan together up front, budgeting roughly 30 to 60 days before construction can begin is a reasonable planning range.

Federal Census data show new single-family homes took about 8.8 months on average from authorization to completion in 2025 — roughly 7.5 months for homes built for sale, about 12 for contractor-built homes, and closer to 14.5 months when owners manage the build themselves. Monsoon-season weather, materials, and labor can all move your timeline.

A draw schedule is the timeline for when the lender releases funds to your builder, tied to construction milestones such as foundation, framing, rough-ins, and final completion. FHA and USDA both require documented inspections — and your written authorization — before each draw is disbursed. Every lender splits the percentages a little differently. The series guide to Construction Loan Draws, Inspections, and Rates During the Build walks through a full draw cycle, request to disbursement.

No. Many construction loans finance the land purchase along with the construction costs. If you already own the lot, its equity can count toward your down payment — under FHA rules, land you have owned for more than six months counts at full appraised value, while a more recent purchase counts at the lesser of what you paid or its appraised value.

You cover the difference out of pocket — which is exactly why builders and lenders plan a contingency reserve, commonly 10–20% of the budget, for price increases and change orders. A contingency is a best practice rather than a government requirement; USDA expressly permits financing one as part of the loan.

It's much harder than it used to be. FHA allows you to act as your own general contractor only if you are a licensed general contractor. USDA's single-close program prohibits owner-builders entirely, and it requires a builder with at least two years of experience, a state license, and $500,000 in general liability insurance.

An "as-completed" appraisal estimates the market value of your finished home on its lot — before construction starts — based on your plans, specifications, and comparable properties. That number determines how much the lender will finance. When the build is done, the lender confirms completion (Fannie Mae lenders use Form 1004D) before the loan converts to your permanent mortgage.

Lower than most people think — but individual lenders often set their own higher minimums on top of the agency floors. FHA allows 3.5%-down financing at a 580 score (500–579 requires 10% down; below 500 does not qualify). VA and USDA set no minimum credit score at all — 640 is simply the threshold for USDA's automated underwriting system, with manual underwriting available below it. Conventional agency floors run to 620, and 680+ is a common lender requirement for construction deals. Ask any lender — including us — where the agency rule ends and the lender overlay begins.

Typically yes — you pay interest only on the amount disbursed so far, so payments start small and grow as construction progresses. A few lenders instead charge interest on the full commitment from day one, so ask how yours works. Once construction completes and the loan converts, you begin regular principal-and-interest payments. The series guide to Construction Loan Draws, Inspections, and Rates During the Build shows how the monthly number climbs as the house rises.

Yes — with a one-time close, the permanent rate is set at closing, months before the house is finished. FHA requires the lender to document the lock-in point, cap the maximum rate your mortgage can convert to, and permit locking lower if rates fall during construction; USDA establishes the permanent rate at the closing itself.