Construction Loans 101: A Complete Guide for Building Your Home

Building a home from the ground up is an exciting journey, but it comes with important financial decisions. One of the most crucial is understanding Construction Loans. At Red Canoe Credit Union, we offer Construction Loans, Land Loans, and a digital draw process with CoFi to make your building experience smoother and more transparent.

This guide walks you through everything you need to know about Construction Loans, including timelines, steps, and what sets Red Canoe apart.

What is a Construction Loan?

A Construction Loan is a short-term loan used to pay for building a home. Unlike a traditional mortgage, which finances a completed home, a construction loan covers costs as your home is built. Key features include:

• Interest-only payments during construction, helping manage your monthly costs.
• Flexible construction periods up to 18 months.
• Conversion to a permanent mortgage once your home is complete.

Understanding Land Loans

Before building, many builders need to secure land. Red Canoe offers Land Loans that can be coordinated with construction financing, providing key advantages:

• Financing for buildable land in Washington or Oregon, even if utilities aren’t yet installed.
• Flexibility to build now or later after purchase.
• Land financing for properties up to 20 acres.
• Coordinated loans to reduce paperwork and simplify approval.

How Long Does It Take?

Construction loans typically follow this timeline:

Note: Delays can occur due to weather, permitting, or design changes. Red Canoe allows extensions with proper documentation.

Step-by-Step Roadmap for Your Construction Loan

1. Initial Consultation / Pre-Qualification

Meet a Home Loans Officer to review your budget, land, and builder options.

2. Land Purchase (if required)

Secure your lot with a Red Canoe land loan. Ensure it’s buildable and zoned appropriately.

3. Submit Construction Plans

Provide detailed plans, specifications, and cost estimates. Your builder must be licensed.

4. Set Up Draw Schedule & Financing Terms

Establish the construction timeline, milestone payments, and interest-only terms.

5. Digital Draws with CoFi

Track progress, submit draw requests, and receive inspections digitally for faster, more transparent funding.

6. Construction Monitoring

Builder completes work, inspections verify milestones, and funds are disbursed accordingly.

7. Final Inspection & Completion

Confirm all systems are approved and the project is finished as planned.

8. Conversion to Permanent Mortgage

The loan converts to a permanent mortgage, and full payments begin.

To view the full process, click here.

What Makes Red Canoe Unique?

• Land + Construction in One Place - Simplifies financing and approval.
• Flexible Terms - Construction periods up to 18 months with interest-only payments.
• Digital Draw Process - CoFi platform for faster, paperless, and transparent draws.
• Local Expertise - Home Loans Officers familiar with local builders, permitting, and communities.
• Land Flexibility - Buildable land doesn’t require utilities; max 20 acres.

Frequently Asked Questions

Who must act as general contractor?

A licensed general contractor or builder is required. Homeowners cannot serve as their own general contractor.

What if construction isn’t finished on time?

Submit a request for an extension. Additional documentation and fees may apply.

When do principal and interest payments start?

After construction is complete and the loan converts to a permanent mortgage.

What is a draw?

A draw is a loan advance for a completed construction phase, submitted digitally through CoFi and funded after inspection.

Ready to Build Your Home?

Whether you’re buying land or ready to start construction, Red Canoe is here to guide you through every step. Connect with a Home Loans Officer today to explore your options and take the first step toward building your dream home.