Home Top 10 Construction Loans In 2021
Edith Muthoni

The idea of building a home, sinking a swimming pool or pursuing significant structural adjustments to your property is all exciting until you factor in the costs. Most people cannot afford to build a new home or pay for major structural improvements.

Enter a special type of funding – the construction loan. This refers to a short term loan advanced to individuals seeking to custom-build their homes or carry out capital intensive property improvements.  It differs from the conventional mortgage in the sense that it is short term, attracts higher interest rates – as most lenders consider it risky – and the amounts advanced can be used to cover not just the home building costs  but virtually every other cost relating to the construction and property improvement.

Also, see how you can easily qualify for a loan even with a bad credit score 

Note: There are only two instances when a credit union or a local bank will advance you a construction loan. One, is if you are a certified real estate developer  and two is if you involve a qualified builder in the project. In either case, you will be required to furnish the lender with the construction Blue Book and have the minimum down payment that often averages 20% the loan amount.

Top constructions loans for 2021: Summary

Reviewers Choice
Wells Fargo
Available Loan Amount
$25,000 - $500,000
Available Term Length
20 years
Representative APR
4.275% - 9.375%
Visit Now
U.S. Bank Loan
Available Loan Amount
$3,000 - N/A
Available Term Length
30 years
Representative APR
Visit Now
Available Loan Amount
$5,000 - $4 million
Available Term Length
18 months
Representative APR
Visit Now
Available Loan Amount
$5,000 - $250,000
Available Term Length
36-60 months
Representative APR
4.33% - 4.55%
Visit Now
Available Loan Amount
$2,000 - $250,000
Available Term Length
6-18 months
Representative APR
1.5% -10%
Visit Now

How does it work?

Construction loans are short-term, with their repayment periods extending to no more than 12 months.

3 settings icons with the phrase

To qualify for a construction loan, you must either have the backing of a qualified builder or be a qualified developer yourself – in which case it would be best if you applied for the owner-builder construction loan. Note, however, that in either case you will be required to furnish the lender with the construction “blue book,” which comprehensively details the estimated construction costs and workflow.

Understand that the loan has to be repaid within the stipulated time. Most lenders have nonetheless, adopted these three flexible repayment options. The first, and the most popular, involves repaying the loan in equal monthly installments. The second involves paying the loan’s monthly interest during the construction period and settling the balance in lump sum upon completion. Thirdly, you can chose to apply for the “End Loan” and use it to clear the construction loan. The end loan in this context refers to a special loan that can be easily converted into a medium- to a long-term fixed-rate mortgage.

Why should you take a construction loan?

I. Capital for home investment

A construction loan gives you the much-needed capital to build a home or real estate project. Just like conventional mortgages, construction loans are ideal if you are looking to become a homeowner, but have no capital to purchase your own house. The loan will cover all the project costs  and most even have the option of converting the loan into a mortgage later.

II. Build your customized home

A construction loan gives you the rare opportunity to build a house from the ground up. You can work with a builder of your choice or even make it yourself. These loans give you the freedom to design and build a unique home that captures your family’s needs.

III. Fund your commercial construction project

Construction loans can fund your commercial property and projects. If you are in the construction business, these loans can be used to invest in equipment, labor, or any other costs involved in a real estate project. And since you have the refinancing option, you can setup the real estate property using the loan and easily convert it to a long-term repayment plan.

Here is a list of what we consider the Best Homeowner loans in 2021

What are the pros and cons of taking a construction loan?


  • Its perfect credit for building custom-homes and real-estate projects
  • It covers all the project costs
  • It is a  short-term loan with feasible repayment plans
  • It can be refinanced at the end of the term or converted to a long-term mortgage
  • It allows you to save money on construction as opposed to mortgages


  • It has short repayment periods – often within 12 months or by the time of completing the project
  • It attracts high and variable interests unlike the fixed-rate mortgages
  • Its difficult to qualify for construction loan if you are not a certified builder

Selection criteria

  • Loan products and terms
  • Loan application process and waiting time
  • Minimum qualification requirements
  • Customer service
  • Interest rate
  • Draw schedule
  • Complaints and Reviews

Top 10 constructions loans for 2021

2. Wells Fargo – up to 89% of your home value

Wells Fargo is another popular lender offering different types of construction loans for qualifying applicants. They have a nationwide network of consultants and loan officers who are available via phone. The lender also provides an extended rate lock program that locks your interest rate for up to 24 months. This significantly reduces the overall interest you end up paying on your loan. Wells Fargo also accepts online applications and has a financing checklist you can use to review eligibility requirements.

Our Rating

  • Maintains easy-to-reach consultants
  • It provides for home equity refinancing
  • You can apply for the loan online
  • Qualifying for the loan requires a high credit score (above 600)
  • Loan closing costs are highly variable

3. Normandy – up to $4 million at 10.95% APR

Normandy is another mortgage lender offering various types of construction loans. They have a particular interest in funding residential home constructions. They also provide land loans and advisory expertise in the new home construction loans sector. Today, Normandy has provided over $800 million in residential construction loans. These services, including loan funding and servicing are available in 39 states across the US. They also allow online registration and application. Additionally, successful applicants receive their loans within 21 days. Normandy enjoys a reputable A+ rating in BBB and offers online account management as well as online loan pre-qualification.

Our Rating

  • Maintains a fast loan application and approval process
  • Normandy offers multiple types of construction loans
  • Normandy also advances land loans
  • Normandy asks for strict pre-qualification requirements
  • The lender charges high-interest rates - APR 10.95%

4. NBKC – Over 25 years of industry experience

The National Bank of Kansas City is an FDIC insured bank and approved Freddie Mac and Fannie Mae Lender. It offers a wide range of home loan products, including VA, FHA, and building and construction loans. NBKC is highly reputed for exceptional customer service and convenience. They have 25 years of experience in the banking sector and allow nationwide online loan application. NBKC provides a line of credit home construction loans. They also offer discounts to members as well as a helpful finance calculator.

Our Rating

  • The loan application process is easy and straightforward
  • Provides you with extra resources like loan calculators
  • The lender has a nation-wide online presence
  • Lacks sufficient physical offices throughout the country

5. Kabbage – up to $150,000 at 10% APR

Kabbage is another popular online lending platform that offers various types of personal and business loans, including construction loans. It provides a business line of credit loans to all qualifying companies. This includes all sizes and sectors. If you are looking for a construction loan awarded to contractors and builders, Kabbage offers a quick, convenient way to apply for up to $150,000. Repayments are made in six or twelve months with monthly fee inclusive of the interest. Unlike most lenders, you do not need an excellent credit score. However, you must have a business in operation for at least 12 months. This is ideal if you need construction loans for a real estate project or commercial buildings.

Our Rating

  • The loans come with flat fee rates and 10% APR
  • Fast loan disbursement- within 24 hours
  • Maintains a convenient online loan application process
  • One must have at least 12 months business credit history
  • Requires proof of monthly $4,200 minimum income

6. Quicken Loans –Best for the wide variety of loans availed

Quicken Loans is another popular lender offering multiple construction and mortgage loan products. It is the largest online lender in the US if you are looking for an established lender with experience in both mortgage and home refinancing. Established in 1985, Quicken is focused on offering a wide range of mortgage loans, both personal and commercial. Their current home loan offers include VA, FHA, Adjustable-rate, Flat-rate, and Jumbo. You can also apply for a construction loan to finance your new house. In addition to this, Quicken offers loan and mortgage calculators, and refinance guides.

Our Rating

  • Accepts and processes online construction loan applications.
  • Low interest rates make it ideal for refinancing loans.
  • Offers quick loans.
  • Doesn't provide home-equity refinancing.
  • It's purely online with no office locations.

7. Fund Box – up to $100,000 at 78.6% APR

If you run a construction business, then you may need to take loans to fund projects awaiting invoices from your clients. FundBox offers invoice financing that allows you to borrow a maximum amount limited only by what your invoices generate. You can take loans from $1,000 to $100,000 paid within three to six months. It is more like selling your invoices at a discount. This loan can be used in construction or any other business. Loans are also disbursed within a few hours.

Our Rating

  • Smooth loan application process.
  • Perfect for funding various phases of your construction.
  • Fundbox lends to all types of credit scores.
  • Relatively high interest rates - up to 798% APR.
  • You will be charged for early loan repayment.

8. Lending Tree – up to $35,000 at 36% APR

Lending Tree and its array of commercial construction loans works best for businesses in the construction industry. You can borrow term loans, SBA, lines of credit, and equipment financing loans among others. Lending tree also allows you to borrow enough capital to finance your construction projects. This P2P loans marketplace gives you a platform where you can find construction, mortgage, and home refinancing loans with adjustable and fixed-rate options. Their fees and rates are relatively low, although rates vary depending on the individual lender. You however need to have a business with an over 12-month history of operation and a minimum monthly income of $8,000 to qualify for the loan.

Our Rating

  • Quick loan disbursement - within 24 hours
  • You can qualify with low credit score or non-existent credit history
  • Loans come with ow rates and fees - APR starting from 5.99%
  • Charges highly variable interest rates
  • High minimum monthly income requirement

9. Guaranteed Rate – Available in over 50 states

Guaranteed rate is a highly reputable lender with various construction and mortgage loan offers. It is the one-stop solution that loans you enough capital to finance the construction or purchase of a real estate property. Guaranteed rate is also ideal if you are looking for an interest-only construction and mortgage refinancing loans. As an interest-only lender, you will pay lower interest compared to other conventional offers. The platform is also famed for its quality customer service and is available in all the 50 states.

Our Rating

  • You can lock your interest during the construction phase
  • Long-term home refinancing options that include 15 ad 30-year terms
  • Maintains a straightforward loan application process
  • Smooth loan application process

What to consider when choosing a construction loan

There are various things to consider before and after applying for a construction loan. These loans are not ideal for everyone, and there is no one-fit-for all. Some of the areas to give priority include:

I. Credit score

Qualifying for a construction loan can be tough if you have a limited credit history. You should, therefore, consider developing a consistent history and a good rating before applying for such loans. It is also essential to watch and continue building your credit after successfully applying for a construction loan. This will increase your likelihood of qualifying for the end loan, which is very critical in facilitating the refinancing of your credit into a long-term mortgage.

II. Loan terms and policies

Different lenders impose different conditions on their loan products. You should carefully read all the terms and clauses in the loaning agreement to ensure you are well informed on all aspects. You can also compare various offers from local lenders in your area to find those with better loans and repayment terms. If you do not understand any part of the contract, ask the lender for clarity, or engage a professional attorney or real estate broker.

III. Builder vs. owner-builder

You can build your own home if you have the experience. However, most lenders are reluctant to fund individuals to develop their own homes. You will have to provide a comprehensive list of requirements and proof of knowledge/experience in construction. If you are using a builder, make sure you work with qualified professionals. This will ensure your home’s value is higher than the loan you took to facilitate its construction.

IV. Business vs. residential construction

Your project, including aspects of why you build the home, usually determines the best loan for you. If you are applying for a residential construction project, there are loan products better suited to residential apartments. Just as there are loans for building your own home. Loans offered to businesses that are in the construction sector are also different. Knowing these minor details will help you pick the best construction loan for your unique needs.

In need of urgent cash? why not try any of our recommended payday lenders

Bottom line

A construction loan can finance your dream home from scratch. It is ideal if you have the financial cushion to complete repayments within a year and deal with any construction set-backs. Upon completion, you can apply for an end loan and enroll for a current long-term mortgage plan. It is worth noting that construction loans are balloon mortgages that require payments to be completed by the time your home is finished. They are perfect for those with a piece of property they want to develop. If you are looking for a place to stay, a traditional loan or mortgage might be the right solution for your goals. Nevertheless, several lenders are offering feasible construction loans in the market. The above list comprises some top lenders that will allow you to build a unique home with your specifications.

Glossary of Loan Terms


What is a construction loan?

What are the minimum qualifications for a construction loan?

How long does it take for the construction loan to get approved?

Can I use a physical asset as a guarantee for the down payment?

What is the difference between a construction loan and a mortgage?

Do I have to pay closure fees twice?

Types of Loan – A-Z Directory

Edith Muthoni

Edith Muthoni

Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, commodities, forex, indices, bonds, and cryptocurrency investments. She holds a Masters degree in Economics with years of experience as a banker-cum-investment analyst. She is currently the chief editor, learnbonds.com where she specializes in spotting investment opportunities in the emerging financial technology scene and coming up with practical strategies for their exploitation. She also helps her clients identify and take advantage of investment opportunities in the disruptive Fintech world.