Build instead of buy? Learn how we can help with a TCU Construction Loan

Deciding whether to buy a new home, or build one from the ground up? Building your dream home may be the better option in today's housing market. Skip the bidding wars and invest in your future with a custom home.

There are many advantages to owning a brand-new house. But the first step for many is determining how to get a loan to build. At TCU, we're ready to hammer out the details of a loan that will cover all the construction costs.

Building is your chance to have everything you want in a home, but the construction loan process can be complicated. While approval for a construction loan can be quicker, the process tends to be more comprehensive than when applying for a traditional mortgage.

The lender will usually ask to review the signed construction contract, the draw schedule for funds (we’ll explain this later), detailed plans and construction timeline. They may also inquire about the hired contractor for the project to verify that you are using a licensed and experienced worker. 

In many ways, though, approval for a construction loan is just like approval for a traditional mortgage. You’ll need to have a credit score of at least 660 and proof of income. You’ll also need a down payment that is equal to at least 5%* of the total loan amount. 

Another key difference between a construction loan and conventional mortgage is the way the funds are distributed. Instead of transferring a lump sum, home construction loans are paid to the builder in installments, called “draws.”

For example, funds may be paid out when each of these stages in the project are reached: 

  • Delivering the final plans for the home
  • Obtaining permits 
  • Completing the foundation
  • Framing out the home
  • Installing all drywall, siding, windows and doors
  • Installing HVAC systems, electricity and plumbing
  • Installing interior trims, cabinets, countertops and flooring
  • Substantial completion of the home
  • Final completion of the home

Plus, construction loans are shorter-term loans that cover the cost of building a house. With a construction loan from TCU Mortgage — with financing terms up to 12 months — you benefit from a straightforward plan with a set interest rate.

In addition to using the builder of your choice*, during the construction phase you’ll make interest-only payments and after construction is completed, the loan becomes permanent with a 15-year or 30-year term.

And you’ll only have to go through the closing process once, saving thousands of dollars.

Because the process of building a home has lots of moving parts, it’s important to select your financing with care. Knowing how construction loans operate will speed the approval process so contractors can start building your perfect home.

Meet with a TCU Mortgage Originator for details on how to get started. Find a TCU Mortgage Originator near you at