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Construction Loans & End Loans, A Complete Guide


Buying a new home is an exciting and joyous milestone. Understanding and utilizing the best mortgage product helps immensely. The right builder and lending partner can make this process seamless.

When it comes to custom-built homes in Ohio, let’s examine construction loans and construction-to-permanent end loans.

What is the difference between an end loan and a construction loan?

An end loan simply refers to the homeowner’s mortgage once the property is built. A construction loan is used during the building phase with draws paid to the builder at different stages of construction.  Let’s look at these two lending options in a little more detail….

Features of a Construction Loan in Ohio

Construction loans in Ohio provide you with the funding and resources needed to build your dream home. This includes things like the purchase of the land, the cost of building materials, contractors, and permits.  Construction loans in Ohio tend to be very short-term, often 12 or 18 months.

With construction loans, you and the lender control when money is dispersed to the builder.  The disbursements of the construction loan are made in 5 stages called draws.  Prior to the funds being disbursed to the builder, the lender will verify that the builder has completed the satisfactory work.   The homeowner has to sign off that they’re in agreement prior to releasing the draw to the builder.

In general, a construction loan in Ohio is a much more hands-on process where the lender will be more involved and invested (literally) in the process of your custom home construction.  Many lenders offer a myriad of products to meet lending needs, including but not limited to physician/professional and military loan products.

What is a Construction-to-Permanent Loan in Ohio?

Most customers building a custom home opt for a  construction-to-permanent loan, which is both loans rolled into one with a single closing. For that reason, they are often called “single-closing” loans.  These loans will give you the funds you need for construction and also finance your long-term dwelling mortgage in one.

It’s typical for a borrower only to make interest-only payments on the loan while the construction is underway, which keeps payments low, but doesn’t reduce the principal. When the construction is completed, the loan will roll over into a traditional mortgage without having to go through another closing.  The construction to permanent loan is one of the construction loan programs available.  If you are thinking of building, make sure to discuss all loan programs with your lender to determine which loan is best for you.

For potential lending partners, see a Bob Webb sales associate.  We are happy to connect you with a lender or answer any questions you have about building your new home!

Contact Bob Webb Homes for More Custom-Built Home Information!

This should help demystify some of the major aspects of construction loans and end loans in Ohio, and how they differ from typical home mortgages.

But if you need more information or would like to discuss the ideal financing options for your custom-built home construction project, or just start talking about design ideas you’d like to make a reality, contact Bob Webb Homes today so we can help you break ground on your dream home!

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