What is a construction loan in Washington State and how does it work?

A construction loan in Washington is a short-term, interest-only loan that funds the building of a home from the ground up. Funds are disbursed in phases as construction milestones are met — called draws. Once construction is complete, the loan converts to a permanent mortgage (called a construction-to-permanent loan) or you refinance into a new loan. Qualification requires detailed builder plans, cost breakdowns, a signed construction contract, and usually a 10–20% down payment on the finished home's appraised value.