Looking for a construction loan can be confusing. Knowing what kind of loan you need and what to look out for can be challenging. Having a good builder on your team will make your life during construction much more accessible and ensure you have everything organized and ready to go when you begin the application process and look for the best construction loan lenders.
Applying for a construction loan is slightly different from applying for a home loan for an established house. In addition to evidence of your financial situation, you must provide a building contract detailing the construction stages and drawdown schedule. This is because construction loans are paid out progressively once each construction phase has been completed. Your lender will also require an estimated build time, final cost, and a copy of the building plans and specifications.
A registered valuer values the property (as if complete) as part of the construction loan application. Generally, this amount will be the vacant land plus the construction value. However, valuers consider several other important factors when determining the final deal. 
A commercial real estate loan in Pennsylvania is a home loan aimed to assist those building from scratch. It does not work the same way as a regular home loan, as home loans can only be used to buy an existing property. A construction loan covers the costs of the building process itself.
In a construction loan, payments will not be made to you in one lump sum. Instead, your lender will usually pay you in progress payments – that is, one payment for each stage of construction. Your builder will issue an invoice at each step of the build, which you then pass on to your lender to make the payments.
You may need a deposit ready to cover the initial cost of the materials necessary to begin the construction process. However, this will depend on your lender.
When you are ready to progress your home loan application and apply for formal approval, you must supply your lender with documentation about the build. This will vary among the best construction loan lenders but they will typically require the following:
The interest rate you are charged will depend on your construction loan type and its terms and conditions. Many construction loans have an interest-only repayment period during the construction phase. This makes your repayments more manageable while your home is being built, as you will only be paying interest on the part of the loan that has been drawn. With a typical construction loan, repayments revert to the principal and are reasonable after making the final progress payment. Of course, the exact terms of each loan differ, so you must fully understand the terms and conditions that apply to your construction loan by reading through your home loan contract before signing.
Missing documents could result in delays.
Any time the cost of construction changes, your home lender will send someone out to the property again to inspect and reassess the valuation, no matter how little the difference.
It might seem easy enough to make minor changes as you build, but if it impacts the contract price, you might need to take out a top-up loan to pay the difference.
If you hire contractors separate from your builder, talk to your lender and provide them with sections at the loan application stage. The loan may be able to be extended to cover the additional costs.
This eliminates the hassle of changing the building contract. It may be easier to pay for the small changes upfront yourself rather than changing your agreement regularly.