A construction loan, as its name implies, provides the financing for the construction of your new home. When you're building a new home, most financial institutions require you to take out a construction loan, rather than a conventional mortgage. The construction loan is often blended into a conventional mortgage once the house is finished, in many cases without any additional fees. The final draw comes when the house is completed. The number of draws depends on the bank and how much up front money you put toward the construction of your new home.
Most banks charge a set fee for each draw.
Again, it's best to shop around. This, of course, is the type of loan you will likely have once your new home is finished. Conventional mortgages typically run 15 or 30 years, with the 15-year mortgage usually carrying a slightly lower interest rate. Each point costs one-hundredth of the amount your are mortgaging. Typically, each point that your purchase reduces your interest rate by a quarter of a percent.