Building a home in Portland offers the chance to personalize everything from layout to finishes—but when it comes to financing, things work a little differently than buying a move-in-ready property. Understanding the types of construction loans available, how to qualify, and how to secure the best terms is crucial before you break ground.
This guide walks you through the key financing options for building a new home in Portland, Oregon, including what to expect and how to get approved.
Types of Financing Available
Most buyers use one of the following loan types to fund their new construction project.
Construction-to-Permanent Loans
This is one of the most popular and streamlined financing options. You take out a single loan that covers both the construction phase and converts to a standard mortgage once the home is complete. That means:
- One set of closing costs
- Fewer documents and approvals
- Locked-in interest rates or float-down options
Many Portland-area banks and credit unions now offer these loans with competitive rates, interest-only payments during construction, and fixed-rate or adjustable-rate options once the home is finished.
Stand-Alone Construction Loans
These loans only cover the building phase. Once the house is done, you’ll need to apply for a separate mortgage to pay off the construction loan. While this adds complexity and two closings, it can sometimes offer more flexibility in choosing the final mortgage product.
This may be a fit if you expect rates to drop before your permanent loan starts—or if you’re still shopping for long-term financing.
Owner-Builder Loans
If you’re acting as your own general contractor or heavily involved in managing the build, you might explore an owner-builder loan. These are harder to qualify for but offer potential savings on labor. You’ll need detailed plans, a budget, prior experience, and a licensed subcontractor network to be considered.
Not every lender offers these, so you’ll likely need to find a specialized local provider.
Manufactured Home Construction Loans
Some Portland-area credit unions also offer construction loans specifically for manufactured or modular homes. These typically have lower down payment requirements and may include flexible terms for land-home packages.
Example Lenders in Portland
- Oregon State Credit Union: One-time close options with interest-only construction phase
- Pacific NW Federal Credit Union: Construction and manufactured housing options
- Goldenwest Credit Union: Up to 90% financing with one- or two-close options
- Umpqua Bank, Columbia CU, and US Bank: All offer competitive construction lending programs
How to Qualify
Getting approved for a new home construction loan involves a few more moving parts than a traditional mortgage. Here’s what lenders will expect:
- A credit score of 680 or higher (740+ for best rates)
- A solid down payment (typically 5% to 20%)
- Verified income and reserves
- A detailed construction plan, timeline, and cost breakdown
- Credentials and references for your chosen builder
If you already own the land, many lenders will count that equity toward your down payment. For example, if your lot is paid off and appraises for $100,000, that can offset a chunk of your required contribution.
It’s also common for lenders to offer interest-only payments during the construction period, helping to keep monthly costs lower while the home is being built.
Tips for Securing the Best Loan
Here are a few smart steps to improve your odds of approval—and save money in the process:
- Get quotes from multiple lenders: Compare local credit unions, community banks, and national providers. Rates and terms can vary widely.
- Ask about one-time close options: These loans reduce paperwork and closing costs, especially helpful if you’re juggling land purchase and construction together.
- Explore green building incentives: Oregon offers programs through the Energy Trust and local utilities that reward energy-efficient construction with cash-back or rate discounts.
- Watch the rate environment: Construction loan rates in 2025 are ranging from 6.25% to 9.75% depending on your credit profile and project scope. If you’re hoping to lock in a lower fixed rate post-construction, talk to lenders about float-down or hybrid loan options.
FAQs
What is the minimum credit score for a construction loan in Oregon?
Most lenders require 680, but you’ll get better rates and terms with 740 or higher.
Can I use my land as a down payment?
Yes. Many lenders allow land equity to count toward your required contribution.
How long does it take to close on a construction loan?
Expect 30 to 60 days, depending on your builder’s documentation and permitting timelines.
If you’re planning to build a custom home in Portland, Improve Masters LLC works with trusted lenders and can help guide you through the pre-approval and financing process. Contact us today to explore your options with no pressure and full transparency.