Thinking about building a custom home or taking on a whole‑home renovation in Charlotte? The financing can feel complex, especially when you are juggling design decisions, permits, and builder selection. The good news is you can make smart, confident choices once you understand how construction loans actually work here. In this guide, you will learn the key loan types, how draws and inspections flow, what local permits mean for your timeline, and how to avoid common pitfalls. Let’s dive in.
Construction loan basics
Construction financing is designed to fund work in stages as your project progresses. Loans are structured to match construction milestones, with interest charged only on the funds disbursed. You will choose between one loan that converts to a mortgage at the end or a separate construction loan followed by a new mortgage.
Loan types in Charlotte
- Construction-to-permanent (one-time-close): You close once, the lender funds draws during the build, then converts the balance to your permanent mortgage at completion.
- Stand-alone construction loan (two-close): You use a short-term construction loan, then shop and close a separate mortgage later. This can add time and costs since it involves two closings.
- Renovation loans: For major remodels, options may include FHA construction-to-perm, FHA 203(k), Fannie Mae HomeStyle Renovation, Freddie Mac CHOICERenovation, or local conventional renovation products through approved lenders.
Key financial features
- Down payment and equity: Expect more equity than a standard mortgage. Many lenders look for about 15–25 percent, depending on product and profile.
- Appraisal basis: Lenders review the “as-completed” value using your plans and detailed budget. This appraisal helps set your loan amount.
- Rates and payments: Construction-phase rates are often higher than typical mortgages. Most loans are interest-only during construction and charge interest only on funds drawn. Principal repayment begins when the loan converts to your permanent mortgage or when the permanent loan starts in a two-close structure.
- Fees and costs: Plan for closing costs, draw administration and inspection fees, and sometimes origination or rate-lock fees.
How draws and inspections work
Construction funds are released in stages, not all at once. The lender sets a draw schedule tied to milestones and your builder contract. This protects you and helps keep your project on budget.
Draw schedules
- Draws are tied to progress, such as foundation, framing, rough-in, exterior completion, and final.
- Your lender may pay the builder directly or pay you with oversight. Many require signed lien waivers from the builder and key subcontractors before releasing each draw.
- Lenders often hold a contingency reserve and may retain a final holdback until completion.
Lender vs. municipal inspections
- Lender inspections verify that work matches the draw request and approved plans. These are separate from city or county building inspections.
- Municipal inspections focus on code compliance and safety. Typical checkpoints include foundation, framing, rough plumbing, electrical and mechanical, insulation, exterior systems, and final inspection for a Certificate of Occupancy.
Interest-only period explained
- During construction, you typically pay interest only on the amount disbursed so far.
- Your total interest cost depends on the size and timing of each draw and how long the project lasts.
Converting to your mortgage
- One-time-close: After final inspections, lien waivers, and the Certificate of Occupancy, your construction loan converts to your permanent mortgage per your original terms.
- Two-close: You apply and qualify for a permanent mortgage at completion, which often requires updated underwriting and documents.
Local Charlotte factors that affect timing
Charlotte and Mecklenburg County have specific permit and review steps that can shape your schedule. These steps affect when draws are released and when you can convert to permanent financing.
Permits and reviews
- Inside Charlotte city limits, you will work through City of Charlotte building and permitting requirements. Projects elsewhere in Mecklenburg may be handled by county agencies.
- Specialty reviews can apply for stormwater, erosion control, grading, tree protection, and environmental conditions. These add time and may add conditions to your permit.
Zoning, HOAs, and historic districts
- Zoning, setbacks, and variances should be confirmed early in design. Any rezoning or variance will extend your timeline.
- Many neighborhoods have HOA or architectural approvals. You often need HOA approval before the city or county issues permits.
- Historic or overlay districts may require design reviews and extra approvals.
Contractor licensing and lien protections
- North Carolina requires licensure for general contractors above certain contract amounts. Lenders verify your builder’s license, insurance, and experience.
- North Carolina mechanic’s lien laws protect contractors and suppliers. You should collect lien waivers at every draw and obtain final unconditional waivers at completion.
Utilities and site conditions
- New or upgraded connections for water, sewer, gas, and electrical service may require separate permits and utility coordination. Delays here can impact draw timing and occupancy.
- Floodplain or drainage requirements may need engineered solutions. This affects your budget, schedule, and insurance.
Your step-by-step timeline
Every project is unique, but most follow a similar path.
1) Early feasibility and budget
Evaluate your lot, utilities, and initial design goals. Confirm zoning and any neighborhood guidelines. Build a preliminary budget with contingencies.
2) Design development and pricing
Your architect or designer prepares plans detailed enough for permit and appraisal. Your builder provides a line-item budget tied to a realistic schedule.
3) Lender prequalification
The lender reviews your credit, income, builder credentials, plans, and budget. You may receive preliminary approval subject to appraisal and permits.
4) Permitting and final bids
Submit permit applications and finalize the builder contract. Align the draw schedule to milestones and inspection requirements.
5) Close the construction loan
You sign loan documents and receive the initial draw once contingencies are met. Early funds often cover lot purchase or site work.
6) Build with periodic draws
Work proceeds through defined milestones with municipal and lender inspections. You make interest-only payments on the drawn balance.
7) Final inspection and conversion
After final municipal approval and the Certificate of Occupancy, the lender completes its final review and either converts your loan to permanent or closes your permanent mortgage in a two-close setup.
What lenders typically require
- Borrower documents: Income and asset verification, credit review, and debt ratios similar to a standard mortgage.
- Project documents: Detailed plans and specs, an itemized budget, builder contract, schedule, and an as-completed appraisal.
- Builder documents: License verification, insurance, references, and evidence of experience and financial stability. Some lenders may request bonding.
- Reserves: Many lenders require cash reserves and a contingency line item to cover surprises.
Common pitfalls and how to avoid them
- Incomplete plans: If plans lack detail, the appraisal and underwriting can stall. Insist on complete design sets before final underwriting.
- Underestimating soft costs: Permits, utility hookups, surveys, and design changes add up. Budget a contingency and confirm your lender’s required percentage.
- Scope creep and change orders: Changes can slow work and raise costs. Document changes and understand how increases are funded.
- Permitting or HOA delays: These extend your schedule and interest costs. Address approvals early and with complete submissions.
- Lien exposure: Always collect lien waivers at each draw and require final unconditional waivers at completion. Keep thorough draw paperwork.
Quick checklist before you apply
- Decide on loan type: One-time-close versus two-close.
- Confirm terms: Down payment, rate structure, interest-only period, fees, and draw procedures.
- Lock in your builder: Signed contract, schedule, insurance, and license verification.
- Align draws and milestones: Standardized draw schedule, inspection steps, and lien waiver process.
- Confirm approvals: Zoning, HOA or ARC, and required city or county permits.
- Understand conversion: Know what triggers permanent financing and how your rate and amortization are set.
Partnering with the right builder
A capable builder helps keep your financing on track. Detailed budgets, clear schedules, accurate draw requests, and clean documentation can reduce delays and surprises. Local permitting experience also matters when coordinating plan reviews, inspections, and utilities.
At Carolina Precision Builders, you work directly with an owner-led team that pairs high-end craftsmanship with disciplined project management. We collaborate with architects and designers, prepare lender-ready budgets, manage draw documentation and lien waivers, and coordinate inspections and permits across Charlotte and Mecklenburg County. That way, your financing process stays aligned with your construction milestones.
Ready to talk through your project and timeline? Connect with Carolina Precision Builders to Request a complimentary project consultation.
FAQs
What is a construction-to-permanent loan in Charlotte?
- It is a single loan that funds your build in draws and then converts to your permanent mortgage after final inspections, lien waivers, and the Certificate of Occupancy.
How do lender draws and inspections work?
- The lender releases funds when milestones are met, usually after an on-site inspection that confirms the requested work is complete and matches approved plans.
Are municipal inspections the same as lender inspections?
- No. City or county inspections verify code compliance, while lender inspections verify progress for funding. Most projects require both.
How are payments calculated during construction?
- Most loans are interest-only during the build. You pay interest on the amount drawn so far, typically billed monthly.
What documents do lenders usually require from my builder?
- Proof of licensure, insurance, references, a detailed contract and schedule, and sometimes bonding or financial information.
What local factors can delay my construction loan timeline?
- HOA or historic approvals, specialty reviews like stormwater and tree protection, utility coordination, and complex site conditions such as floodplain requirements.
