New construction loans for self-employed business owners

Two paths for new construction

The first path is a construction-to-perm loan: a single loan that funds the construction in periodic draws as milestones are met, then automatically converts to a permanent mortgage when the certificate of occupancy is issued. You close once, pay one set of closing costs, and lock your permanent rate at the start (or at conversion, depending on the program).

The second path is purchasing a completed new build — a developer's model home, a spec build, or a finished unit in a new community. From a financing standpoint, this is a standard purchase transaction. If you qualify on bank statements, you use a bank statement loan. If you qualify conventionally, you use a conventional loan. The only new-construction wrinkle is that some lenders apply a "new construction" overlay (slightly tighter LTV or reserve requirements).

Income documentation for construction-to-perm

Construction-to-perm loans for self-employed borrowers use the same income documentation as the permanent phase program. If the permanent loan will be a bank statement product, the income underwriting uses bank statements. The construction phase doesn't change the income qualification — it only adds the draw mechanism.

Working with a builder as a self-employed borrower

Most builders require a pre-approval letter before executing a purchase contract for a to-be-built home. A Non-QM pre-approval letter (bank statement or 1099 basis) satisfies this requirement. Some large national builders have preferred lender relationships; you're not required to use those lenders, but their incentives (rate buydowns, closing cost credits) may be worth comparing against your primary lender's rate.

Rate lock and construction timelines

Lock periods for construction-to-perm loans are longer than standard purchase loans — typically 6–18 months. Extended locks carry a premium. Discuss your builder's realistic timeline with your officer before choosing a lock strategy.