Home Construction Loans in Eastern Iowa

A construction loan provides short-term funding to pay for building your new home. Instead of receiving all the money up front, funds are distributed in phases as construction progresses.

These phases, called “draws,” are tied to milestones like pouring the foundation or finishing the roof. During construction, you’ll typically make interest-only payments on the amount drawn.

Once construction is completed, your loan automatically converts to a standard mortgage. This transition is called a construction-to-perm conversion and doesn’t require a second closing. You’ll then begin making regular principal and interest payments based on your finalized loan terms.

Most construction loans require a down payment of at least 10% to 20% of the total project cost.

This can vary based on your credit profile and whether you already own the lot. If you own the land, its value may count toward your equity and reduce the cash needed up front.

Yes. If you already own the land, the loan can include the cost of construction only. The value of your lot may count toward your required down payment.

You’ll need to provide a copy of your deed, a title search, and proof that the land is build-ready with access to utilities or appropriate permits.

You begin making payments as soon as the first draw is issued. These are interest-only payments based on the amount drawn, not the full loan.

Once construction is complete and your loan converts to a permanent mortgage, full principal and interest payments begin based on your final loan amount and terms.

Most lenders prefer a credit score of 680 or higher for construction loans. A stronger score gives you more financing options and can lead to better rates. FSB evaluates more than just your score, we also look at your income, debt, assets, and the details of your project to make a lending decision.

Explore Tips for Building & Improving Your Credit Score

Once the final inspection is complete and all draws have been issued, your loan transitions to a permanent mortgage. This process, called construction-to-perm conversion, doesn’t require a second closing. You’ll lock in your final mortgage rate and begin making full payments, just like a traditional home loan.

To qualify for a construction loan, you’ll need more than just good credit. Lenders want to see a complete plan and confidence in your ability to repay once the home is built. Most require the following:

• 18 years old or older to apply 

• Credit score of at least 680

• Finalized building plans and budget

• Signed contract with a licensed builder

• Proof of income and employment

• Land ownership or a purchase agreement

• Minimum 10% down payment or land equity

Some borrowers may qualify with lower scores or less money down, but stronger financials give you more flexibility. A local lender can guide you through exactly what you’ll need for approval.