When building a home or commercial property, financing can take a different form from a traditional mortgage. Construction loans are short-term loans intended to fund the building process until the project is complete. Unlike a standard mortgage, which provides a single lump sum, construction loans are typically paid out in phases. This assures that the funds are released as work progresses, protecting both the borrower and the lender. Understanding how these loans work helps you plan better for timelines, payments, and budgeting.
How Construction Loans Differ From Traditional Mortgages
A construction loan is not merely about funding—it’s about getting money in stages. Funds are distributed in ‘draws,’ which align with the milestones of the build. For example, money is released for the foundation, framing, and later finishing work. Each stage frequently requires inspection before the lender approves the next draw. This system helps ensure the project stays on track. Borrowers usually make interest-only payments during the construction phase, and once the project is complete, the loan can be converted into a permanent mortgage. This process applies to residential and commercial projects, including residential construction loans in Buford, GA.
Types of Construction Loans Available
There are several types of construction loans, and choosing the right one depends on your project and goals. A construction-to-permanent loan starts as a construction loan and then automatically transitions into a standard mortgage once the project is done. This option saves time and closing costs since you don’t need two separate loans. A stand-alone construction loan only covers the building phase, requiring a separate mortgage after completion. This option can be useful for those who want flexibility in choosing future financing. Businesses planning larger projects frequently apply for a
commercial construction loan in Buford, GA, which provides the funding needed to manage bigger budgets and timelines.
What to Expect During the Application Process
Applying for a construction loan involves more documentation than a typical mortgage. Lenders usually require detailed building plans, a qualified builder, and a realistic budget. Since construction involves more risk, lenders may ask for higher down payments. Creditworthiness also plays a significant role in approval. Once approved, the lender will work closely with you and the builder to schedule inspections and release funds. For those interested in building a new home, new construction loans make it possible to bring your vision to life with structured financing.
Partner with Peoples Bank & Trust for Your Construction Financing
At Peoples Bank & Trust, we know that building a new home or starting a commercial project can feel overwhelming, but the right financing makes all the difference. We specialize in helping clients navigate residential, commercial, and new construction loans in Buford, GA, with flexible options and local expertise. If you’re ready to take the next step with your home or business plans, we’re here to provide the right financing and guidance. Contact us today at Peoples Bank & Trust, and let’s move forward together.