Can I act as my own builder?

Most lenders require a licensed builder. Owner builder loans are rare and usually cost more.

What if construction runs over budget?

You usually pay the overrun yourself. Lenders often require a contingency in the budget.

Do I need permits before closing?

Lenders typically want approved plans and permits in place or close to it. Check your town's building department.

Construction loans

A construction loan pays for building a home in stages, called draws, as work is inspected. A one-time close loan converts to a regular mortgage when the home is done. A two-step loan pays off the construction loan with a separate mortgage at the end.

What lenders ask for

Signed plans, a budget and a contract with a licensed builder.
An appraisal based on the plans and the finished value.
Your own funds for the down payment and for cost overruns.

Choosing a structure

One-time close: one approval and one closing. FHA, VA and Fannie Mae offer versions through some lenders.
Two-step: two closings and two sets of costs, but more flexibility to shop for the final mortgage.
During construction you usually pay interest only on the amount drawn so far.

Questions people ask

Can I act as my own builder?: Most lenders require a licensed builder. Owner builder loans are rare and usually cost more.
What if construction runs over budget?: You usually pay the overrun yourself. Lenders often require a contingency in the budget.
Do I need permits before closing?: Lenders typically want approved plans and permits in place or close to it. Check your town's building department.

Official sources

Facts checked 2026-11-01. General information, not financial, legal or tax advice. We are not a lender.

Related: Loan types

Guides →