Home construction loans and typical mortgages have several distinct differences. Though both types of loans can be used to secure financing for a home, lenders generally require home construction loan borrowers to make larger down
payments. Lenders also typically have more stringent credit requirements for borrowers seeking a construction loan than for those applying for a typical mortgage. The repayment term can also vary between the two home loans. Some home construction loans must be paid off in a year or less, depending on the type of loan the buyer secured, and standard interest rates are generally higher as well.