Building a custom or semi-custom home in Southern Arizona is a dream that begins with a vision—whether it’s watching the sunrise over the Catalina Mountains from your back patio, or designing the kitchen that finally has room for everything. But before a single stone is set or shovel hits the ground, your dream needs a financial foundation. That’s where construction loans come in.
Unlike traditional mortgages used to purchase an existing home, construction loans are designed specifically to finance the process of building a home from the ground up. These loans are structured differently, carry unique requirements, and play a vital role in making your ideal home a reality—especially in regions like Tucson, Oro Valley, Marana, and Vail, where open landscapes and expansive views invite personalized design.
What Is a Construction Loan?
A construction loan is a short-term, high-interest loan used to cover the costs of constructing a new home. These funds are not released in a lump sum like a traditional mortgage. Instead, they’re distributed incrementally in what are known as “draws,” tied to specific stages of your home’s progress—from foundation to framing, electrical to drywall, and finally, to completion.
During the construction period, most construction loans are interest-only, meaning you only pay interest on the funds that have been drawn, not the total loan amount. Once your home is complete, the loan is either paid off by a new mortgage (in the case of a stand-alone construction loan) or converted into a permanent mortgage (in a construction-to-permanent loan).
Why Construction Loans Are Essential in Custom Builds
When buying a completed home, your financing is based on the home’s current appraised value. But in a custom or semi-custom build, the home doesn’t exist yet—so lenders must evaluate the value of the completed project, along with the credibility of the builder, the land value, and the borrower’s financial health.
This makes construction loans uniquely suited for projects in communities like those offered by Fairfield Homes, where every home is tailored to maximize views, comfort, and lifestyle. These loans give you the flexibility to personalize everything from the footprint of the floor plan to the materials, finishes, and layout that suit your needs—all while financing the project step by step.
Types of Construction Loans
Not all construction loans are created equal. Choosing the right one depends on your financial goals, long-term plans for the home, and how involved you want to be in the process.
Construction-to-Permanent Loan
This is the most common and convenient type of construction loan. It acts as both the construction loan and the permanent mortgage, rolled into one. You secure funding to build the home, and once it’s complete, the loan converts into a traditional mortgage without a second closing. This simplifies the financing process, reduces paperwork, and may even lock in your mortgage rate at the start of construction—ideal if interest rates are expected to rise.
Stand-Alone Construction Loan
In this two-phase approach, you first secure a short-term loan to cover the cost of building the home. Once construction is complete, you apply separately for a mortgage to pay off the construction loan. While this approach can offer flexibility (particularly if you anticipate better mortgage rates later), it requires two closings, two rounds of paperwork, and additional fees.
Owner-Builder Loan
This niche option is only available to borrowers who are also licensed builders or general contractors. It allows you to act as your own builder and oversee all aspects of construction, from sourcing materials to managing subcontractors. However, these loans are difficult to secure without a professional construction background and detailed planning. Most lenders prefer working with established builders to reduce risk and ensure project success.
How Construction Loans Work
Unlike a traditional mortgage, which releases all funds upfront, construction loans disburse money in segments—typically five to seven draws. Each draw corresponds to a phase of construction, and funds are only released after a professional inspector or appraiser confirms that the phase is complete. This system ensures that the builder stays on schedule and that funds are being used appropriately.
Here’s a simplified example of a construction loan draw schedule:
- Draw 1 – Land purchase and site preparation
- Draw 2 – Foundation poured
- Draw 3 – Framing complete
- Draw 4 – Rough plumbing, electrical, and HVAC
- Draw 5 – Interior finishes and drywall
- Draw 6 – Final construction and inspections
Each draw requires documentation and approval before funds are released, creating a natural check-in point to ensure construction is progressing as planned.
What Construction Loans Cover
Construction loans can be used to cover nearly every aspect of your home’s creation, including:
- Architectural and design fees
- Permits and city inspections
- Land clearing and excavation
- Foundation and structural framing
- Plumbing, electrical, HVAC
- Roofing, windows, doors
- Interior finishes—flooring, cabinetry, countertops
- Landscaping, driveways, garages, and patios
If you’re building with a luxury builder like Fairfield Homes, your construction loan can also include upgrades such as smart home features, energy-efficient materials, solar installations, and custom outdoor living spaces—enhancing both your lifestyle and your long-term home value.
Qualifying for a Construction Loan
Because construction loans are considered riskier than traditional mortgages, lenders apply a stricter set of criteria to determine approval. You’ll typically need:
- A strong credit score (680 or higher is preferred)
- A detailed budget and construction timeline
- A 20% to 25% down payment
- A qualified builder with a track record of completed homes
- Proof of income and asset documentation
Lenders will also review your builder’s credentials and your finalized home plans to ensure the project is viable. Fairfield Homes’ reputation as a trusted builder in Arizona adds credibility to your application, and their experience streamlines the draw and inspection process for you and your lender alike.
Benefits of Using a Trusted Local Builder
One of the most significant advantages of working with a company like Fairfield Homes is their longstanding partnerships with local lenders who understand the nuances of building in the Sonoran Desert. These lenders are familiar with regional regulations, permitting timelines, and valuation methods for custom homes—resulting in faster approvals and fewer surprises during construction.
Additionally, Fairfield Homes provides transparency throughout the building process. Their planning team will work closely with you to finalize your floor plan, select finishes and features, and establish a build timeline—all of which are vital components in securing a successful construction loan.
Common Challenges—and How to Avoid Them
Construction loans offer incredible flexibility, but they also require careful planning and patience. Common challenges include construction delays due to weather or supply chain disruptions, rising material costs, or changes in interest rates. By locking in a fixed-rate loan early and working with an experienced builder, many of these challenges can be managed or avoided entirely.
It’s also important to maintain strong communication with your lender and builder throughout the process. Delays in inspections, paperwork, or draw approvals can slow the build timeline if not addressed proactively. Working with a team that has built dozens—if not hundreds—of homes in Arizona means you benefit from systems already in place to keep everything moving forward.
After Construction: Converting to a Mortgage
If you chose a construction-to-permanent loan, the transition from build to occupancy is relatively smooth. Once the final inspection is complete and a certificate of occupancy is issued, your loan will automatically convert into a permanent mortgage with regular monthly payments.
For those with stand-alone construction loans, the process includes applying for a new mortgage, closing on the permanent financing, and using the new loan to pay off the original construction loan. This adds an extra layer of complexity, so many buyers opt for construction-to-perm loans for simplicity and cost savings.
Build the Home You’ve Always Envisioned
Financing a custom home may feel intimidating at first—but it doesn’t have to be. With the right construction loan and an experienced partner like Fairfield Homes, you’ll have everything you need to confidently move from blueprint to final walkthrough.
Whether you already own land or are still choosing the right community, Fairfield can guide you through the entire process. From initial planning and budgeting to final inspections and move-in day, our team collaborates with you and your lender to ensure a seamless experience from start to finish.
Let’s Build Together
Are you ready to finance and build the home you’ve been dreaming about? Let’s start the conversation.
Contact Fairfield Homes today to learn more about custom and semi-custom building opportunities across Tucson, Oro Valley, Marana, Vail, and beyond.
📞 Call us at 1-800-830-5134
📧 Email us at info@fairfieldhomesarizona.com
🔗 Explore communities and quick move-in homes at fairfieldhomes.com
