203k vs. Construction Loan

They sound similar and work completely differently. A construction loan is short-term financing that must be refinanced into a permanent mortgage when the work ends — two closings, two sets of costs, and rate risk in between. A 203k is one permanent mortgage from day one.

Construction loans typically demand larger down payments, stronger reserves, and builder-grade project oversight; they're the right tool for ground-up builds and true whole-structure rebuilds. The 203k Standard handles surprisingly heavy work — additions, structural repair, full gut rehabs — at 3.5% down with one closing.

The practical rule: if the existing structure remains and the project is renovation, the 203k family (or HomeStyle for conventional) almost always wins on cost and simplicity. If you're building new, it's a construction loan.