How to Get Started on a Home Build: Your Construction Loan Checklist

It’s not always easy to find a house that checks every box on your wish list. So why not build your dream home instead?

Building a home from the ground up can feel daunting and complicated, but at Honor Credit Union, we’ve helped many members through the process.

This guide will walk you through what a construction loan is and give you a simple checklist to help you get started.

What Is a Construction Loan?

A construction loan is a special type of loan that helps you pay for the building of your home. It’s different from a regular mortgage because you get the money in stages as your home is built.

Here’s how it works at Honor Credit Union:

• Low down payments – as little as 5%
• Flexible construction terms – up to 12 months
• One approval process & one set of closing costs
• Interest-only payments during construction

Once your home is complete, your construction loan automatically turns into a regular mortgage—no need to reapply or pay new closing costs!

Why You Need a Construction Loan Checklist

Building a home takes planning. Having a checklist helps you stay organized and save time. It’s the best way to keep track of your documents, your budget, and every step of your loan process.

Step-by-Step Construction Loan Checklist

Step 1: Set a Budget

• Determine how much you can afford.
• Include costs for land, materials, labor, and permits.

Step 2: Find a Trusted Builder

• Look for a licensed builder with experience and good reviews.

Note: Your lender may ask for your builder’s information to verify qualifications, manage schedules, and evaluate cost breakdown.

Step 3: Gather Your Documents

• Proof of income
• Credit report
• Building plans and a detailed cost estimate

Step 4: Apply for the Loan

• Schedule a meeting with a mortgage loan expert at Honor Credit Union.
• Ask about loan terms, rates, and how funds are released during construction.

Step 5: Loan Approval and Building Begins

• Once approved, your builder can start construction.
• The lender sends money in portions (called draws) as work is completed.

Step 6: Convert to a Regular Mortgage

• After the home is finished, your construction loan becomes a standard home loan, making this a simple and seamless loan option for home construction.

Tips for a Smooth Construction Loan Process

• Stay organized with a folder or app.
• Be prepared for frequent updates and communication from your lender. At Honor, we will be sure to communicate with you every step of the way.
• Keep some extra money set aside for surprises or small changes.

Common Mistakes to Avoid

• Not checking your builder’s background.
• Underestimating total costs. The builder will use a sworn statement, usually in a spreadsheet, to track the budget for every item purchased for the home.
• Forgetting to plan for delays or permits.

Final Thoughts

Building your own home takes planning, patience, and the right amount of support, but it’s one of the most rewarding projects you’ll ever do.

Start by reviewing the above construction loan checklist and gathering your documents. When you’re ready, contact an Honor Credit Union mortgage lender to take your first step toward building your dream home.