Kentuckiana Mortgage Group
Construction Loans in Kentucky and Indiana
Building a home starts with a plan for the land, the project, and the financing. A construction loan may help cover eligible building costs while your new home takes shape.
Kentuckiana Mortgage Group helps borrowers in Louisville, Southern Indiana, and surrounding Kentucky and Indiana communities explore construction financing, understand the requirements, and prepare for the next steps.
What Is a Construction Loan?
A construction loan provides financing to build a home. Unlike a typical purchase mortgage, which funds the purchase of a completed property, construction financing generally releases money in stages as the work progresses.
The construction phase is usually temporary. Before you begin, understand how the balance will be repaid or moved into long-term mortgage financing when the home is finished.
Construction Financing and Your Permanent Mortgage
Construction-to-permanent financing combines the building phase with a long-term mortgage. Some programs use a single closing, with conversion to permanent financing after construction is complete and the required conditions are met.
Other arrangements use a separate construction loan followed by a new mortgage. That may involve another application, updated qualification, additional closing costs, and exposure to changes in interest rates. Ask which structures are available for your project and what happens if your circumstances change.
Planning Your Build and Project Budget
Start with the land, proposed home plans, builder, estimated costs, and expected completion schedule. Depending on the program, the lender may review the construction contract, plans and specifications, permits, builder qualifications, and an appraisal based on the proposed finished home.
Your budget should account for site preparation, utility connections, materials, labor, permits, and other project expenses. Ask how change orders, unexpected costs, and delays will be handled before you commit to the build.
How Construction Draws and Payments Work
Rather than releasing the full construction budget at once, a lender generally advances funds through a draw schedule. Draws are tied to the progress of the work and may require inspections, invoices, or other documentation before funds are released.
Some construction loans require interest-only payments on the amount already advanced during the building phase. Payment structures vary, and payments may increase as more money is drawn. Ask for an explanation of your construction-phase payments and how they change when permanent financing begins.
Down Payment and Cash Needed
Your required contribution depends on the lender, program, project costs, appraised value, and financial profile. If you already own the land, its eligible equity may count toward the transaction under some programs. The lender must review the value and any existing liens.
In addition to the down payment or equity contribution, plan for closing costs and any required reserves or contingency funds. Ask which expenses can be financed, which you must pay separately, and when your funds will be needed.
Moving From Construction to Your Mortgage
Before permanent financing begins, the lender may require evidence that the home is complete, final inspections or valuation updates, occupancy documentation where required, and other closing or conversion conditions.
Confirm the construction deadline, any extension terms, the permanent loan’s rate and payment, and whether updated income or credit documents will be needed. A construction approval does not mean every later condition has already been satisfied.
Construction Financing in Kentucky and Southern Indiana
Whether you plan to build in Louisville, New Albany, Jeffersonville, Floyds Knobs, or another Kentucky or Indiana community, discuss financing while you are reviewing land and builder options. The project location, property details, and proposed home can affect available programs.
Kentuckiana Mortgage Group can help you explore available construction financing and understand the information needed for a review. If you are buying a completed new home from a builder, you may need a purchase mortgage rather than a separate construction loan.
Frequently Asked Questions About Construction Loans
Do I Need to Own the Land Before Applying?
Not always. Some programs may include a land purchase, while others are structured around land you already own. Tell your loan officer about the lot, purchase contract, and any existing land loan so they can review available options.
Can Land Equity Count Toward My Contribution?
It may, depending on the program, appraised value, ownership details, and existing liens. Do not assume the full purchase price or estimated land value will count. Ask your loan officer how the lender will calculate eligible equity.
Can I Choose My Own Builder?
You can discuss your preferred builder, but the builder and construction contract must satisfy the lender’s requirements. Review those requirements before signing a contract or paying a deposit that you may not be able to recover.
Do I Make Mortgage Payments During Construction?
Construction-phase payments depend on the loan structure. Some programs require interest-only payments on funds already advanced, while others use different arrangements. You may also have rent or an existing mortgage to pay during the build.
What If Construction Takes Longer or Costs More?
Delays or cost increases may require additional funds, lender approval, revised documentation, or an extension. Extra fees or changes to financing may apply. Ask about contingencies, rate-lock expiration, and extension policies before closing.
What Should I Have Ready to Get Started?
Bring information about the land, builder, proposed home, project budget, and schedule if available. Your loan officer will also explain which income records, asset statements, credit information, and project documents are needed.
Talk Through Your Construction Financing
Whether you already own a lot or are beginning to compare builders, tell us about your plans. Kentuckiana Mortgage Group can help you explore available financing and understand what to prepare before moving forward.
Prefer to talk? Call 812-725-0017
Kentuckiana Mortgage Group Inc. | NMLS 1793085 | Equal Housing Opportunity. This information is for educational purposes and is not a commitment to lend. All loans are subject to credit and property approval, underwriting, and applicable program requirements. Construction financing is subject to lender review of the builder, project, budget, appraisal, and completion conditions. Program availability, draw procedures, payment structures, and terms vary by lender and may change. Pre-approval is not final loan approval.
