What Are Construction Loans?
Construction loans finance the cost of building a new home, from purchasing raw land through final completion. Unlike traditional mortgages that provide funds upfront, construction loans disburse money in stages (called draws) as work progresses. Once construction is complete, the loan converts to a permanent mortgage or is refinanced into a standard home loan.
Construction-to-permanent loans are the most popular option, combining construction and mortgage financing into one loan with one rate lock. Todd Uzzell offers FHA, VA, conventional, and specialty construction loans throughout Arizona.
Why Choose Construction Loans?
Build Exactly What You Want
Construction loans allow you to build a custom home tailored to your specifications. Choose materials, colors, upgrades, and customizations that wouldn't be possible with an existing home.
One Loan, One Rate Lock
Construction-to-permanent loans lock your interest rate at closing and carry it through construction to your permanent mortgage. No need for two loans, two closings, or two rate locks.
Interest-Only Payments During Construction
During construction, you typically make interest-only payments based on funds drawn. Once construction completes, you begin regular principal-and-interest payments on the full mortgage amount.
Energy Efficient & Modern
New construction homes meet current building codes and energy efficiency standards, often resulting in lower utility bills and fewer maintenance issues compared to older homes.
Builder Warranties & Guarantees
New construction includes builder warranties covering structural defects, systems, and workmanship for 1-10 years depending on the builder.
Construction Loan Requirements in Arizona
Credit Score
FHA construction loans require 580+ credit. Conventional programs typically require 620+ credit. VA construction loans require 580+ credit. Todd Uzzell works with lenders offering construction financing for lower credit scores (540+) with manual underwriting and strong compensating factors.
Down Payment
FHA construction loans require 3.5% down. Conventional programs typically require 10-20% down. VA construction loans require 0% down for eligible veterans. The down payment is calculated on total estimated construction costs.
Builder Agreement & Plans
You'll need a written builder agreement, architectural plans, specifications, and construction budget breakdowns. The lender uses these documents to evaluate project feasibility and final value upon completion.
Cash Reserves
Most lenders require 2-6 months of mortgage payment reserves. Some require additional reserves for contingency construction costs to handle potential overruns.
Debt-to-Income Ratio
Your total monthly debt should not exceed 43-50% of verified monthly income. Construction loans often allow higher ratios than traditional mortgages if cash flow and reserves are strong.
Construction Loan Process in Arizona
1. Application & Pre-Qualification (Days 1-3)
Submit application with builder agreement, plans, and financial documents. Todd Uzzell reviews your situation and provides pre-qualification feedback with no credit impact.
2. Property Appraisal (Days 4-14)
The lender orders an appraisal of the land and estimated completed property value based on comparable finished homes and construction cost estimates.
3. Underwriting & Approval (Days 15-30)
Full underwriting review including income verification, credit check, and construction cost analysis. Lender verifies builder reputation and experience. You'll receive conditional approval with any requirements.
4. Final Closing (Days 31-45)
Close on the construction loan. First draw is typically released at closing to pay for land purchase and begin foundation work.
5. Construction & Draws (Days 45-180+)
Lender conducts inspections at foundation, framing, rough-in, drywall, and completion stages. Each draw is released upon passing inspection. You make interest-only payments on outstanding draws.
6. Conversion to Permanent Mortgage (At Completion)
Upon final inspection and completion certification, the construction loan automatically converts to a permanent 30-year (or chosen term) mortgage. Your interest rate remains the same. No new application needed.
Ready to Build?
Todd Uzzell can pre-qualify you for a construction loan in 24 hours. Discuss your project, timeline, and financing options.
Start Your ApplicationSchedule Free ConsultationFrequently Asked Questions About Construction Loans
What is a construction loan?
A construction loan finances the cost of building a new home. Unlike mortgages, construction loans disburse funds in stages (draws) as construction progresses. Upon completion, the loan converts to a permanent mortgage or is refinanced.
What is a construction-to-permanent loan?
A construction-to-permanent loan combines construction financing and permanent mortgage financing into one loan. During construction, you make interest-only payments. Upon completion, the loan automatically converts to a standard mortgage.
How much down payment do I need for a construction loan in Arizona?
FHA construction loans require 3.5% down. Conventional programs typically require 10-20% down. VA construction loans require 0% down for eligible veterans. Portfolio lenders may offer flexible options.
What credit score do I need for a construction loan?
FHA construction loans require 580+ credit. Conventional programs typically require 620+ credit. Todd Uzzell works with lenders offering construction loans for credit scores as low as 540 with manual underwriting.
How are construction loan draws handled?
Lenders conduct inspections at foundation, framing, rough-in, drywall, and completion stages. Upon passing each inspection, funds are released (a draw) to the contractor. Most projects have 3-7 draws depending on complexity.
What happens if construction costs exceed my loan amount?
If costs exceed your approved amount, you can request a loan increase (subject to approval), pay the overage out-of-pocket, or modify construction scope. Budget contingencies of 10-15% are recommended.
Can I get a construction loan for a custom home?
Yes. Custom home construction loans work the same as tract home loans. You need a builder agreement, detailed plans, specifications, and realistic timeline.
How long does construction loan approval take?
Approval typically takes 30-45 days from application to closing. Construction itself takes 90-180 days depending on complexity. Upon completion, the loan converts to permanent financing automatically.
Can I use construction loans for renovation/remodel projects?
Some lenders offer construction-style loans for major renovations. However, FHA 203k renovation loans are often better for existing home renovations. Todd Uzzell can recommend the best loan type for your project.
Are construction loans available for investment properties in Arizona?
Yes. Construction loans are available for rental properties, multi-family builds, and commercial construction. Investment property construction loans typically require 20-25% down.
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About Todd Uzzell
Todd Uzzell (NMLS #1525192) is a licensed Arizona mortgage lender with Starboard Financial. Specializing in construction loans, new build financing, and mortgage solutions for builders and developers throughout Arizona.
Contact Todd:
Phone: 480-330-1724
Email: todd.uzzell@gmail.com
Website: todduzzell.com