What Is a Construction Loan? A Simple Guide for Building in Billings, MT
If you’re planning to build a custom home or take on a large-scale renovation in the Billings area, one of the first things you’ll likely ask is: How do I finance it? While some homeowners choose to pay out of pocket, many use a construction loan—a short-term financing option designed specifically for home builds and major renovations.
At Boyce Built Construction, we’re not lenders, and we don’t offer financial advice. But we’ve worked on many projects where construction loans played a key role, and we’re very familiar with how the process works. We believe that understanding the basics of construction loans helps you make more informed decisions—and keeps your project running smoothly from start to finish.
What is a Construction Loan?
A construction loan is a short-term loan that helps fund the cost of building a home or completing a major renovation. Unlike a traditional mortgage that provides one lump sum, construction loans are released in phases, or "draws," as the work is completed.
For example:
Draw 1 might cover excavation and foundation
Draw 2 might follow framing
Draw 3 might be after mechanicals or drywall
These draws are approved by the lender, often after a site inspection, to verify progress.
How do Construction Loans Work?
Here’s a simplified overview of the process:
You apply for the loan through a lender with finalized plans, a construction contract, and a detailed budget.
Loan funds are distributed in scheduled draws, based on specific milestones in the build.
During construction, you typically make interest-only payments on the funds drawn so far.
After completion, many construction loans convert into a traditional mortgage.
Why Construction Loans Benefit Both You and Your Builder
For Homeowners:
You don’t need to come up with the full cost of the project up front.
The draw schedule ensures you’re only paying for completed work.
Inspections at each stage offer extra peace of mind.
Interest-only payments can help manage monthly expenses during the build.
For Builders (like us):
We receive timely, scheduled funding that keeps the project moving.
Draw approvals create clear checkpoints for communication and progress.
Delays due to funding gaps are less likely.
Everyone stays aligned—homeowner, lender, and builder.
A Familiar Part of the Process
In Billings and throughout south-central Montana, we’ve worked with many clients who used construction loans to make their dream homes a reality. Whether you’re starting from scratch, modernizing your existing home, or adding square footage, a construction loan can be a practical and efficient way to finance your project.
We don’t handle the lending side, but we understand how construction loans fit into the bigger picture. We’re happy to provide estimates, schedules, and any builder documentation your lender might require along the way.
Final Thoughts
If you're exploring your financing options and think a construction loan might be the right fit, it's worth connecting with a lender early in the process. And when you're ready to build, we’re here to deliver a streamlined, professional experience that’s backed by years of experience and local expertise.
📩 Get in touch to learn more about how we build—and how we keep things moving.