Here’s the deal with construction loans: they’re not like regular mortgages, and that trips up a lot of investors. You walk into a bank thinking you’ll get approved the same way you did for your last rental property, and suddenly you’re buried in paperwork, waiting weeks for answers, or worse… getting flat-out rejected.
If you’re planning a ground-up build in Charlotte, Mooresville, Huntersville, or Concord, you need to understand what you’re getting into. Construction loans are a different animal. They’re short-term, they release funds in stages, and traditional banks treat them like they’re handing you a blank check to build the Taj Mahal.
But here’s the good news: once you know how the process works and who to work with, construction loans become a lot less scary. Let’s break down exactly how to get a construction loan in Charlotte and what you need to do to get approved without the runaround.
What Is a Construction Loan and Why It’s Different
A construction loan is a short-term financing option that covers the cost of building a property from the ground up. Instead of getting one lump sum like a traditional mortgage, you get funds released in stages (called draws) as construction progresses.
Think of it like this: with a regular mortgage, the bank gives you money to buy a house that already exists. With a construction loan, the bank is funding something that doesn’t exist yet. That’s riskier for them, which is why the approval process is stricter and the terms are different.
Here’s how construction loans work in Charlotte:
You apply and get approved based on the projected value of the finished property, not what it’s worth right now. The lender reviews your construction plans, contractor agreement, and budget. Once approved, they set up a draw schedule that releases money at specific milestones like foundation completion, framing, roofing, and final walkthrough.
During construction, you typically pay interest only on the amount that’s been disbursed, not the full loan amount. Once the build is done, the loan either converts to a permanent mortgage or you pay it off and refinance.
The key difference? Construction loans are based on what will be, not what is. That means lenders scrutinize everything: your contractor’s track record, your construction timeline, your budget, and your ability to handle cost overruns.
Types of Construction Loans for Charlotte Investors
Not all construction loans are the same. Depending on your project and your exit strategy, you’ll want to choose the right type.
Construction-to-Permanent Loans
This is the most common option for investors building rental properties or custom homes they plan to keep. The loan covers the construction phase and then converts into a traditional mortgage once the build is complete. You close once, which saves time and money. If you’re looking to renovate an existing property instead, consider checking out renovation loans.
Best for: Investors planning to hold the property long-term or owner-occupants building a custom home.
Construction-Only Loans
Some loans cover just the construction phase. When the project is done, you either pay off the loan in full or refinance into a permanent mortgage. This type gives you more flexibility if you’re planning to sell the property right after completion or if you want to shop for better mortgage rates later.
Best for: Fix and flip investors or builders who plan to sell immediately after construction.
Owner-Builder Options
If you’re acting as your own general contractor, some lenders offer programs specifically for owner-builders. These can be harder to qualify for because lenders see more risk when you’re managing the build yourself. You’ll typically need to prove you have construction experience or a solid plan with licensed subcontractors.
Best for: Experienced investors or builders who want more control over the construction process and can manage subcontractors directly.
Step-by-Step Process: How to Get a Construction Loan
Getting approved for a construction loan in Charlotte takes more legwork than a standard mortgage, but the process is straightforward if you know what to expect.
Step 1: Choose Your Contractor and Get Your Plans
Before you even apply, you need a licensed contractor and detailed construction plans. Lenders won’t approve a loan without knowing exactly what you’re building, how much it will cost, and who’s doing the work.
Your contractor should be licensed in North Carolina and have a solid track record. Get a detailed contract that outlines the scope of work, timeline, and payment schedule. You’ll also need architectural plans, engineering reports (if required), and a line-item budget.
Charlotte and Mecklenburg County have specific permitting and zoning requirements, so make sure your plans comply before you submit them to a lender.
Step 2: Find the Right Lender
This is where a lot of investors get stuck. Traditional banks are picky about construction loans. They want perfect credit, big down payments, and they move slowly.
Working with a broker like On Point Home Loans, Inc. gives you access to 3,000+ commercial lenders. That means more options, faster approvals, and creative solutions when traditional banks say no. A broker can match your project with a lender who specializes in construction financing for real estate investors.
Step 3: Get Pre-Approved
Pre-approval for a construction loan works differently than a regular mortgage. The lender will review:
- Your credit profile
- Your income and assets
- Your construction plans and budget
- Your contractor’s credentials and insurance
- The projected value of the completed property
An appraiser will evaluate the property based on the “as-completed” value using your plans and comparable sales in the area. This appraisal determines how much you can borrow.
Step 4: Close on the Loan
Once approved, you’ll close on the loan and the funds will be held in escrow. You won’t get all the money upfront. Instead, it’s released according to the draw schedule as construction milestones are completed and inspected.
Step 5: Monitor Construction and Request Draws
As your contractor completes each phase (foundation, framing, roofing, etc.), you or your contractor will request a draw. The lender sends an inspector to verify the work is complete, then releases the next round of funds.
You’ll make interest-only payments on the amount that’s been disbursed. This keeps your monthly payments lower during the construction phase.
Step 6: Convert or Refinance
When construction is finished and you receive your certificate of occupancy, the loan either converts to a permanent mortgage (if you chose a construction-to-permanent loan) or you refinance into a long-term loan. For higher-value properties, you might need a jumbo loan to cover the full amount.
What You Need to Qualify for a Construction Loan
Lenders have strict requirements for construction loans because of the risk involved. Here’s what you’ll need to get approved:
Credit Score
Credit score requirements vary by lender and program. While many lenders prefer 680 or higher, some programs accept credit scores as low as 640, especially if you have strong financials, substantial equity in the land, or a larger down payment. On Point Home Loans, Inc. works with multiple lenders, so we can find construction financing options that fit your credit profile.
Down Payment
Down payment requirements typically range from 10% to 25% of the total project cost, depending on the lender and your financial profile. Many programs accept as little as 10% down, while others may require 20% to 25%. If you already own the land, your equity in the land can count toward the down payment, reducing your cash outlay. The specific down payment you’ll need depends on factors like your credit score, experience, and the project details. On Point Home Loans, Inc. can help you find lenders with flexible down payment options.
Cash Reserves
Lenders want to see that you have enough cash reserves to cover at least six months of payments and potential cost overruns. Construction projects can run over budget, and lenders need to know you can handle it.
Contractor Vetting
Your contractor must be licensed, insured, and have a solid track record. Lenders will verify their credentials and may even review past projects. If your contractor has a history of delays or shoddy work, it could kill your approval.
Detailed Construction Budget
You’ll need a line-item budget that breaks down every expense: land, permits, materials, labor, contingency funds. Lenders want to see that you’ve thought through every cost.
Charlotte-Specific Considerations for Construction Loans
Building in Charlotte comes with its own set of challenges and advantages. Here’s what you need to know:
Permitting and Inspections
Mecklenburg County has specific permitting requirements for new construction. Make sure your contractor is familiar with local codes and inspection schedules. Delays in permitting can push back your timeline and increase costs.
Charlotte’s surrounding suburbs like Mooresville, Huntersville, and Concord each have their own permitting processes. Working with a local lender like On Point Home Loans, Inc. helps because we understand the ins and outs of each jurisdiction.
Market Conditions
Charlotte’s real estate market has been growing steadily, which is good news for construction projects. Property values have been rising, especially in desirable suburbs. That means the “as-completed” appraisal is more likely to come in strong, which helps with loan approval.
However, construction costs in Charlotte have also been climbing due to material shortages and labor demand. Make sure your budget includes a healthy contingency (at least 10%) to cover unexpected price increases.
Local Lender Advantage
Working with a Charlotte-based lender gives you a major edge. Local lenders understand the market, have relationships with appraisers and inspectors, and can move faster than out-of-state banks. On Point Home Loans, Inc. has been operating in Charlotte for 50+ years, so we know the local builder network, the permitting process, and how to get deals closed quickly.
Common Mistakes Investors Make (and How to Avoid Them)
Getting a construction loan approved is tough enough. Don’t make it harder by falling into these common traps:
Mistake 1: Underestimating Costs
Construction projects almost always cost more than you expect. Material prices fluctuate, labor gets expensive, and there’s always something that pops up mid-build. Budget conservatively and include at least a 10% contingency fund. Lenders will feel more confident if you’ve accounted for overruns.
Mistake 2: Choosing the Wrong Contractor
Your contractor can make or break your project. Don’t go with the cheapest bid. Check references, verify licenses and insurance, and make sure they have experience with projects similar to yours. A bad contractor will delay your timeline, blow your budget, and potentially cost you the loan.
Mistake 3: Not Having Enough Cash Reserves
Even if you get approved, things can go sideways fast if you don’t have cash on hand. Material delays, weather issues, permit holdups… all of these can extend your timeline and increase costs. Lenders want to see that you can handle these bumps without defaulting.
Mistake 4: Skipping the Pre-Approval Process
Some investors start shopping for land or signing contractor agreements before getting pre-approved. That’s backwards. Get pre-approved first so you know exactly how much you can borrow and what your terms will be. Otherwise, you might commit to a project you can’t afford to finance.
Mistake 5: Going to Only One Lender
If you only talk to your local bank, you’re limiting your options. Traditional banks are conservative with construction loans. They want perfect credit, big down payments, and they move slowly. A broker like On Point Home Loans, Inc. has access to 3,000+ commercial lenders, which means more flexibility, better terms, and faster approvals. For time-sensitive projects, you might also consider hard money loans as a short-term bridge option.
Why Working with a Broker Beats Going to a Single Bank
Here’s the reality: most traditional banks don’t like construction loans. They’re complicated, risky, and time-consuming. So they set high bars for approval and offer limited options.
When you work with a mortgage broker, you get access to a network of lenders who specialize in construction financing. On Point Home Loans, Inc. works with over 3,000 commercial lenders, which means we can find solutions that traditional banks simply won’t offer.
More Loan Options
Every lender has different requirements and programs. One lender might require 25% down, while another accepts 20%. One might be strict about credit scores, while another focuses more on cash reserves and project viability. A broker shops your deal to multiple lenders and finds the best fit. If you’re a first-time buyer after construction, FHA loans or adjustable rate mortgages might be options worth exploring.
Faster Approvals
Traditional banks can take weeks (or even months) to approve a construction loan. Brokers have relationships with lenders who specialize in construction financing and can move faster. On Point Home Loans, Inc. has the network and experience to speed up the approval process by matching you with the right lender quickly.
Creative Financing Solutions
Maybe your credit isn’t perfect. Maybe you’re doing an owner-builder project. Maybe your construction budget is higher than normal. A broker can find lenders who specialize in these situations. Traditional banks will just say no. For rental property investors, DSCR loans can be another viable option after construction is complete.
Local Expertise
On Point Home Loans, Inc. has been in Charlotte for 50+ years. We know the local market, we know the builders, and we know which lenders work best for Charlotte construction projects. That local knowledge speeds up the process and helps avoid problems.
Charlotte’s Growing Market Makes Now a Great Time to Build
Charlotte’s real estate market has been growing steadily over the past few years. Population growth, job growth, and strong demand for housing have driven property values up across the metro area.
For investors, that means ground-up construction projects can be profitable. Building in desirable areas like Mooresville, Huntersville, and Concord positions you to capture appreciation and rental income in markets with strong fundamentals. If you’re managing multiple investment properties, blanket loans can help consolidate your financing.
But don’t wait too long. Construction costs are rising, and interest rates (while still competitive) can fluctuate. Getting your construction loan locked in now means you can start building before costs climb even higher.
Ready to Get Your Construction Loan Approved?
If you’re serious about building in Charlotte, don’t let bank rejections or complicated loan processes stop you. On Point Home Loans, Inc. has 50+ years of experience helping investors like you secure construction financing.
We have access to 3,000+ commercial lenders, which means we can find creative solutions when traditional banks say no. Whether you’re building your first rental property or expanding your portfolio with a ground-up project, we can help you get pre-approved quickly.
Contact with our construction loan specialist. We’ll review your project, explain your options, and get you pre-approved so you can start building.
Don’t let financing hold you back. We specialize in creative construction financing for Charlotte investors. Schedule a free consultation today or start your application online.
Frequently Asked Questions
How long does it take to get approved for a construction loan?
The timeline for construction loan approval varies by lender and the complexity of your project. Traditional banks can take several weeks to review your application, plans, and contractor credentials. However, working with a broker like On Point Home Loans, Inc. can speed up the process significantly. We match you with lenders who specialize in construction financing and can move more quickly than traditional banks. Once you have all your documents ready (plans, budget, contractor agreement), approval can happen much faster.
Can I use a construction loan if I already own the land?
Yes. In fact, owning the land can make it easier to get approved for a construction loan. Your equity in the land can count toward your down payment requirement, reducing the amount of cash you need upfront. For example, if the lender requires a 20% down payment and your land is already worth 15% of the total project cost, you might only need to bring 5% in cash. Make sure to get the land appraised so the lender can factor its value into your loan approval.
What happens if construction costs more than expected?
Cost overruns are common in construction projects. That’s why lenders want to see cash reserves and a contingency fund in your budget. If costs exceed your original budget, you have a few options. You can pay for the overruns out of pocket using your cash reserves. You can also request a loan modification if the increased costs are justified and the lender approves. This is why it’s critical to budget conservatively and include at least a 10% contingency fund from the start.
Do I need to use a licensed contractor or can I build it myself?
Most construction loans require you to work with a licensed, insured contractor. Lenders want assurance that the project will be completed on time and up to code. If you want to act as your own general contractor, you may be able to find owner-builder programs, though these can be harder to qualify for because lenders see more risk. You’ll typically need to prove you have construction experience, detailed plans, and licensed subcontractors lined up for each phase of the project.
What credit score do I need to qualify for a construction loan in Charlotte?
Credit score requirements for construction loans vary by lender. While many lenders prefer 680 or higher, some programs accept credit scores as low as 640, especially with strong financials, substantial cash reserves, or significant equity in the land. Your credit score is just one factor. Lenders also look at your income, assets, contractor credentials, and project budget. If your credit is less than perfect, working with a broker like On Point Home Loans, Inc. gives you access to lenders who specialize in flexible construction financing for investors.
