Construction loans are short-term financing that release funds in stages, or ‘draws,’ tied to project milestones such as foundation, framing, or final completion. At the end, they often convert to a long-term mortgage.

Key advantages include customized funding disbursed as your project progresses, interest-only payments during construction to ease cash flow, and flexible terms with the option to convert to a permanent mortgage. See our Benefits section above for more detail.

Typical requirements include a good credit score (around 680 or higher), an experienced licensed builder, and comprehensive project documentation such as architectural plans, budget, and timeline.

“Downsides include higher interest rates compared to traditional mortgages, a more complex approval process, and the risk of cost overruns requiring additional funds.

Look for lenders with proven experience in construction loans, a range of programs suited to your project, and strong client feedback. In Los Angeles, local market knowledge is key, choose a lender familiar with regional building costs, permitting processes, and contractor standards.

The process begins with an initial consultation to review your project and financing options. You’ll then submit documentation including financials, project plans, and builder details. After an appraisal and underwriting review, approval is granted and funds are disbursed in stages (draws) as construction milestones are completed.

Work with a licensed builder who has a strong track record, prepare thorough architectural and financial plans, and include a contingency fund in your budget to account for unforeseen costs.

In Los Angeles, consider project scope, permitting requirements, and local building costs. Lenders will pay close attention to detailed plans, experienced contractors, and whether your budget includes reserves for unexpected expenses. Comparing interest rates and terms from multiple lenders is also critical in California’s competitive market.