7 Best Construction Loans in Texas

Amid a significant population surge, Texas captured 15.3% of all new U.S. housing authorizations in 2021, with 265,955 new units approved. Notably, 67.5% of these were single-family homes, underscoring the state’s growing allure for those seeking spacious living.

As Americans continue to flock to Texas from other states, the valuation for the average single family home build in Texas was $236,092 according to recent data. Many people pulling up stakes for Texas are enjoying finding a piece of open land and constructing their dream home, rather than entering the pre-owned housing market for real estate. To finance these construction projects, Texans are turning to loan financing to buy the land and build the houses.

Everything is bigger in Texas, and many banks offer various options that allow homebuyers to create the home of their dreams. Many Texas banks have expertise funding specialized construction projects and can help you navigate the application, qualification, and funding process. 

If you’re a homebuyer or home builder looking for a construction loan specialist in Texas, we can quickly connect you with several options customized to your specific needs so that you can make the best decision for you.

Benefits of financing a new construction loan in Texas

Texas’s booming construction industry has made construction loans increasingly popular, offering versatile financing for building, renovating, or expanding properties. These loans cater to both residential and commercial projects and provide flexible terms, including short- or long-term options, as well as fixed or variable interest rates. They often come with lower rates than other financing options, such as home equity or personal loans.

Here are some of the benefits of using a construction loan in Texas:

• Construction loans can be used for a variety of purposes, including building a new home, renovating an existing home, or even making additions or repairs to a property.

• Construction loans can be used for both residential and commercial projects.

• Construction loans can be either short-term or long-term, depending on the needs of the borrower.

• Construction loans can be either fixed-rate or variable-rate, depending on the market conditions at the time of borrowing.

• Construction loans in Texas typically have lower interest rates than other types of loans, such as home equity loans or personal loans.

• Construction loans can be used to finance the entire project, or just a portion of it.

• Construction loans can be used to finance the construction of a new home, as well as the purchase of the land.

• Construction loans can be used to finance the construction of a home on a leased lot or vacant lot.

• Construction loans can be used to finance the construction of a home on a short-term basis, such as for a vacation home.

One of the biggest advantages of Texas construction loans is that they can be used to finance the purchase of a property, as well as the construction costs associated with that property. This can provide a significant financial advantage to buyers who might not otherwise be able to afford the total cost of the purchase and construction, especially larger homes in Texas.

If you are considering a construction project in Texas, be sure to talk to an experienced construction lender about the possibility of taking out a construction loan. Getting credit approval relies on a good credit score and your debt-to-income ratio. Finding a mortgage lender who has experience with construction loans is highly recommended. Your loan officer might have access to calculators to tell you more about your rate and expected mortgage payments. Thankfully, there are several loan programs for construction loans in Texas to make this process easier.

6 Best Construction Loan Lenders in Texas

1. American National Bank & Trust

American National Bank & Trust has a construction loan product that offers Texans a way to purchase land, build new construction or both. Some of important services and terms they offer are:

• Up to 90% financing for construction loans
• Can work with low credit scores in certain circumstances
• Land loans are available as bridge loans for people who want to buy the land today and build in the future
• Single application, approval and closing process.

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

2. Capital Farm Credit

Capital Farm Credit offers a construction loan program that simplifies the process by combining construction and permanent financing into one package. With the Rural 1st® product, they make it easier to transition to permanent financing without needing to refinance. Here are some key features:

• Land can be used as equity for the down payment, maximizing the amount you can finance.
• Options for variable, adjustable, or fixed-rate financing during construction.
• Flexibility to choose your own builder, with support from the lender.
• Up to one year to complete your project, accommodating potential delays like weather or scheduling.

When you’re ready to connect with a loan officer to evaluate their services, use our form to quickly match with construction loan programs based on your specific circumstances.

3. Randolph-Brooks Federal Credit Union (RBFCU)

RBFCU is a financial cooperative in Texas that has a business presence in Austin, Corpus Christi, Dallas-Fort Worth and San Antonio. They originally only worked with members of the military but there are now multiple ways to achieve eligibility but membership is still required.

The bank offers a one-time close construction loan that begins with a short-term, fixed-rate construction period and ultimately converts to a permanent fixed-rate mortgage upon completion of the construction. You will make interest-only payments on a schedule that follows stages of the home’s construction. They can finance up to 90% of the value of the home.

If you’re ready to apply with RBFCU, you’ll need the following information:

• The amount of credit you would like to borrow
• The number of years you want to finance your loan (term length)
• Your current employment and income information
• Your phone number and email
• Information for joint borrowers you plan to include on the mortgage loan (including date of birth, address, income and employment, Social Security number and contact information; if applicable)
• An idea of the total amount you would like for your loan and monthly payments

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

4. Amegy Bank

Amegy Bank offers a one-time close construction loan that includes the permanent loan, construction loan and lot purchase in the same loan. Among other services, they can also help you buy a lot if you’re not ready to build yet.

Some of the terms for the Amegy Bank construction loan are:

• Available for new home construction or major remodeling projects.
• Low fixed rate during construction period.
• Low down payment options available.
• No maximum construction loan amount.
• Initial construction phase has one extension available.
• Construction disbursements to your builder are processed by Zions Bank.
• Average or above average credit score

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

5. Texas Regional Bank

A relatively new bank, Texas Regional Bank started in 2010 and has grown to 22 banking centers across the Rio Grande Valley and the Texas Hill Country. They offer a construction loan product but the details are sparse.

Here are some of the features:

• Lock in an interest rate at the beginning of the process.
• Single set of closing costs to cover the construction financing and the permanent mortgage.
• Single application process for the construction to permanent loan product.

If you want more details about their program, you can reach them at 1-800-580-6536.

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

6. Texas Bank

Texas Bank started in Tatum, Texas but has expanded to 11 locations in East Texas and the Dallas area. Once you’re ready to build your home, Texas Bank has a construction loan that allows you to build a primary residence or second home.

Some of the details provided by Texas Bank include:

• Payments are interest-only during construction phase
• Construction draws applied in stages based on work completed
• Local processing
• Personal service for the life of the loan

If you want to learn more about the Texas Bank construction loan, you can reach the bank at 1-844-319-6684.

7. VeraBank

VeraBank offers a comprehensive construction loan product designed to meet the needs of Texans planning to build their dream home. Key features of VeraBank’s construction loans include:

• A streamlined process with a single application, approval, and closing.
• Flexible loan terms tailored to fit your specific construction timeline and financial situation.

To learn more about VeraBank’s construction loan options, contact the business at 1-903-657-8521.

When you’re ready to connect with a loan officer, use our form to quickly match with construction loan programs based on your specific circumstances.

Does a Texas construction loan make sense for you?

Consider the products and rates offered by the lenders

Interest rates are an important factor when considering a construction loan. These loans often come with higher interest rates than conventional mortgages, which can impact your budget. The upside is that interest is typically only charged during the construction phase, meaning you only pay interest on the amount drawn to fund your project. Once your home is complete, you can refinance into a conventional mortgage with a lower interest rate, potentially reducing your long-term costs.

It’s also essential to understand that construction loans are usually short-term loans. Before applying, have a clear plan for how you will pay off the loan once construction is finished. Common strategies include selling the property to repay the loan or refinancing into a standard mortgage for long-term financing.

Understanding the Construction Loan Process

The process of obtaining and using a construction loan is different from a traditional mortgage. Here’s an overview:

1. Pre-Approval: Before you begin building, you’ll need to qualify for a construction loan. Lenders will evaluate your creditworthiness (by running a credit report), income, and the proposed project’s budget. Additionally, they’ll require detailed plans and contracts from your builder.

2. Loan Approval: Once pre-approved, your lender will review the project specifics, including the blueprints, cost breakdown, and timeline. They may also assess the builder’s experience and credentials to ensure the project is viable.

3. Disbursement of Funds: Unlike a standard mortgage, where you receive the entire loan amount upfront, construction loans are disbursed in stages to your checking account. Funds are released in “draws” as construction milestones are completed. Inspections are often required at each stage to confirm progress.

4. Construction Phase: During the build, you’ll make interest-only payments on the loan based on the amount that has been drawn. This business structure can help you manage costs while construction is underway.

5. Conversion or Payoff: Once the project is complete, you’ll need to settle the loan. Some lenders offer a “construction-to-permanent” loan, allowing you to transition seamlessly into a conventional mortgage. If this isn’t available, you’ll need to refinance or use other funds to pay off the balance.

Understanding this process can help you decide whether a construction loan aligns with your goals and financial credit situation.

Looking for construction loans in a different state?

Click on another state to find the best construction loan lenders in that state.