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The money arrives in stages. That is the whole job.
Construction lending across Indiana, for the house you are building and for the commercial build. A construction loan does not land in your account on day one. It is released against work that has actually been done, which is why these files need more attention than any other kind we handle.
Building a home.
Most people doing this have never done it before, and the part that surprises them is that the loan and the build are the same conversation.
Building on your own land
You have the lot, or you are buying it, and a builder is putting a house on it. The usual structure is construction to permanent, sometimes called a one-time close: one set of paperwork that funds the build and then becomes your mortgage when you move in. The alternative closes twice. Which one suits you depends on the build and on what you want to be certain about, and it is worth asking before you sign with a builder.
Land first, house later
Buying the ground now and building in a year or two is a different file from building straight away, and the land purchase has terms of its own. Tell us the plan at the start even if the build is some way off, because what you agree on the land can limit what is possible later.
Buying a house a builder is already putting up
If the builder is funding the construction and you are simply buying the finished house, that is a normal purchase rather than a construction loan, even though the house does not exist yet. Timelines slip on new builds, so the thing to ask about is how long your approval holds.
Building commercially.
Construction is not one product. Which of these you are doing changes who will lend and what they ask for.
Ground-up commercial
A building on a site that does not have one yet. Retail, industrial, office, multifamily. The land, the sitework and the vertical build are all part of the same conversation, and lenders will want them costed separately.
Owner-occupied build
You are building the premises your own business will operate from. This usually opens doors a speculative build does not, because the lender can look at your trading history as well as the property. Worth asking about SBA programs before you assume conventional is the answer.
Renovation and conversion
Taking a building you own, or are buying, and changing what it is. Often the hardest to budget honestly, because what is behind the walls is unknown until somebody opens them.
What replaces the loan at the end
A construction loan is temporary by design. Something has to take its place when the building is finished, and for a commercial build that is a commercial mortgage on the completed property. Line it up at the start, not at the end. The exit is part of the file from day one.
Draws, and why files stall.
This part is the same whether you are building a house or a warehouse. Money comes out in draws, each released after somebody confirms the work is really there. Almost every delay we see is one of these four, and all four are avoidable.
The budget is not line by line
A single number for the whole build will not produce a draw schedule. Lenders want the cost broken into stages they can inspect and release against. Builders usually have this already. Get it before you apply, not after.
The inspection has not happened
An inspector visits and confirms the stage is complete before money moves. That visit takes time to book. Request the draw when the work is close to done rather than the day you need the money, and the gap stops being a problem.
Lien waivers are missing
Subcontractors sign to confirm they were paid for the work covered by the last draw. Without those signatures the next draw does not move. This is the most common reason a build pauses, and it is purely administrative.
Change orders nobody told the lender about
The build changes. That is normal. What is not normal is the lender finding out at the next inspection, because the approved budget no longer matches the building. Tell us when it changes and it is a conversation. Tell us afterwards and it is a problem.
Your builder gets underwritten too.
People expect to be assessed themselves. They do not expect the lender to assess the builder, and on a construction file the builder matters nearly as much. Licence, insurance, financial standing, and whether they have finished work like yours before.
This is worth knowing before you sign a contract, not after. A builder who cannot be approved is a problem you inherit, and the contract is usually signed by then.
The appraisal is done on paper.
There is nothing to value yet, so the appraiser works from your plans and specifications and gives an opinion of what the finished property will be worth. It is usually called an appraisal subject to completion.
Two things follow. The quality of your plans affects the number, because vague drawings produce cautious valuations. And if the finished building is worth less than it costs to build, everybody finds out early, which is uncomfortable and far better than finding out late. If you want the general picture, we wrote about appraisals and what they cost in Indiana.
Call before you break ground.
The expensive mistakes on a construction file are made before anyone applies: land bought on the wrong terms, a builder contract no lender will accept, a budget that cannot be drawn against. None of that is fixable afterwards. Ask us first and the conversation costs you nothing, including if the answer is that the numbers do not work yet.
What to have ready.
More than most files. The build is the collateral, so the build has to be documented.
- Plans and specifications, as final as you have them
- A construction budget broken down line by line, not a single total
- The signed contract with your builder
- Your builder’s details, licence and current insurance certificates
- The land: the purchase agreement, or proof you own it and what you paid
- A build timeline, including when you expect each stage to finish
- Personal tax returns for the last three years, all pages
- Valid photo identification
If you are building a home, add your two most recent pay stubs, W-2s for the last two years, and your most recent bank and asset statements.
If the build is commercial, add business tax returns for the last three years with all pages, business bank statements for the last three to six months, a current debt schedule, your entity documents, and what the finished premises will be used for and by whom.
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