Building a new home in Pembroke is exciting, but the financing can feel confusing. You want clarity on how construction loans work, what lenders expect, and how local permits may impact your timeline and budget. This guide breaks down the process in plain language and gives you a practical checklist tailored to Pembroke. You’ll learn loan options, draw schedules, Title 5 septic considerations, common pitfalls, and where to go for reliable answers. Let’s dive in.
Construction loan basics
A construction loan funds the cost to build your home. It is different from a traditional mortgage because funds are released in stages as your builder completes work. Loans typically run 6 to 18 months, then either convert to a long-term mortgage or get replaced by a separate mortgage. For a quick national overview, you can review the CFPB’s guide to construction loans.
Two common structures
- Construction-to-permanent (one-time close): You close once. The same loan funds the build, then converts to a permanent mortgage at completion. You pay one set of closing costs. Some products let you lock your long-term rate at closing or at conversion.
- Stand-alone construction loan (two-time close): You use a short-term loan for the build, then apply for a separate mortgage after completion. This can give you flexibility on permanent financing later, but you pay two sets of closing costs and handle more paperwork.
How draws and interest work
- Draw schedule: The lender pays the builder in stages that match milestones such as foundation, framing, mechanicals, and finishes. Each draw usually requires an inspection and lien waivers before funds are released.
- Interest during construction: You typically pay interest only on money that has been drawn. Some lenders set up an interest reserve to cover these payments during the build.
- Appraisal: Lenders order an appraisal based on the completed plans and specs. This “as-completed” value drives your loan-to-value and overall loan size.
- Contingency: Many lenders require a reserve of 5 to 15 percent of construction costs to handle unexpected overages.
What lenders look for
Construction loans carry more risk than standard mortgages, so underwriting is tighter. Expect the lender to review:
- Credit, debt-to-income, and cash reserves.
- Builder credentials such as license, insurance, references, and financial stability. Some lenders prefer a fixed-price, turnkey contract.
- Plans, specifications, and a detailed budget with line items for hard and soft costs.
- Appraisal of the completed home and a construction timeline.
Pembroke factors that affect financing
Local approvals, site features, and utilities can influence your eligibility, timing, and cost. Align these early so they do not delay draws or loan conversion.
Permits and town approvals
- Building permits and inspections: Confirm process and timelines with the Pembroke Building Department. Lenders may require proof of permits at closing or prior to releasing specific draws.
- Planning and zoning: Some projects need Planning Board review or may face zoning constraints like setbacks, frontage, and lot coverage.
- Conservation and wetlands: If your lot is near wetlands or a buffer zone, the Conservation Commission may require filings and impose seasonal work limits.
Delays in municipal approvals can slow inspections and draws, which increases interest costs. Build extra time into your plan.
Septic and utilities
- Title 5 septic: If you are not on municipal sewer, lenders often want percolation test results and an approved septic design before significant funding. For state rules and guidance, see the Mass.gov Title 5 septic systems page. Local process questions go through the Pembroke Board of Health.
- Sewer, water, gas, and electric: Utility extensions, trenching, and connection fees add time and cost. Confirm hookups and fees in your budget.
Site conditions and lot development
Clearing, grading, long driveways, ledge or unsuitable soils, and utility runs can move your budget more than finishes do. Order a survey, soils report, and percolation test before you finalize the contract. Lenders often request these reports for underwriting.
Deeds, easements, and restrictions
Check the Plymouth County Registry of Deeds for easements, covenants, or restrictions that can impact buildability, driveways, or utility routes. Unresolved title issues can delay closing and draws.
Your step-by-step roadmap
- Get pre-approved. Construction lending is a specialty. Confirm the lender’s experience, down payment, reserves, and draw process up front.
- Select and vet your builder. Verify license and insurance, request recent references, and review a clear fixed-price contract whenever possible.
- Complete plans and budget. Prepare architectural plans, specifications, and a detailed cost breakdown that separates hard and soft costs and includes a contingency line.
- Confirm site readiness. Order survey, perc and soils testing, septic design if needed, and check zoning and wetlands constraints with the town.
- Apply for permits. Coordinate with the Building Department, Planning Board if applicable, Conservation Commission, and Board of Health.
- Close on the loan. Expect appraisal, inspections, and set-up of interest and contingency reserves.
- Build with a defined draw schedule. Submit draw requests with invoices, inspection reports, and lien waivers.
- Convert to permanent financing. After final inspections, certificate of occupancy, and a final appraisal, your construction-to-perm loan converts or you close on a separate mortgage.
Typical costs, reserves, and timing
- Down payment and equity: Many products require 15 to 25 percent of the total project value. Exact requirements vary by lender and program.
- Interest reserve: Some lenders set aside interest funds so you do not make out-of-pocket interest payments during construction.
- Contingency: Plan for 10 to 15 percent of construction costs. Confirm how your lender treats contingency funds.
- Retainage: Lenders often hold back 5 to 10 percent from each draw until final completion and receipt of lien waivers.
- Fees: Expect appraisal and periodic inspection fees during the build.
- Timeline: Pre-approval and lot purchase can take 2 to 8 weeks. Permitting may take 1 to 6 months or more, especially with septic or wetlands. Construction often runs 6 to 12 months. Conversion takes 2 to 4 weeks after completion.
Common pitfalls in Pembroke and how to avoid them
- Underestimating permit timelines. Start early with the Building Department, Planning Board, Conservation Commission, and Board of Health. Build in buffer time.
- Insufficient contingency. Protect your budget from site surprises such as ledge or long utility runs by holding a 10 to 15 percent reserve.
- Builder issues. Vet experience, insurance, and references. Use a clear scope of work and a defined change-order process.
- Mechanics’ liens. Submit signed lien waivers with each draw. Your lender will likely require them to release funds.
- Financing at conversion. If using a stand-alone construction loan, confirm your plan for permanent financing well before completion.
- Weather delays. New England seasons can pause site work. Add time in your schedule to keep interest carry realistic.
Smart questions to ask
Lender questions
- Do you offer construction-to-permanent loans or only stand-alone construction loans?
- What down payment, reserves, contingency, and retainage do you require for Pembroke builds?
- How are draws structured and who performs inspections? What are the fees?
- When can I lock the permanent rate and how is interest handled during construction?
Builder questions
- Can you provide proof of license, insurance, and three recent references for similar homes?
- Is the contract fixed-price? How do you handle change orders and allowances?
- What draw schedule do you use and how do you coordinate inspections and lien waivers?
- What warranties and post-completion support do you provide?
Town questions
- Building Department: What documents do you need for a building permit and how long is the review period?
- Board of Health: What is the Perc and Title 5 process and what are typical turnaround times?
- Conservation Commission: Are there wetlands or buffer setbacks on the lot and what filings are required?
- Planning Board: Are site plan or subdivision approvals required for my project?
Helpful local resources
Final thoughts
Building a home in Pembroke is very achievable when you align financing, builder, and permits early. Choose the loan type that matches your goals, set a realistic draw schedule, and keep a strong paper trail with inspections and lien waivers. Address Title 5, wetlands, and zoning up front so approvals do not hold up your draws or your move-in date.
If you want a transparent process with clear milestones and weekly build updates, our team specializes in South Shore new construction and subdivision sales. Ready to map your path from lot to keys? Start a conversation with The Guimares Group today.
FAQs
What is a construction-to-permanent loan in Pembroke?
- It is a single loan that funds your build and then converts to a long-term mortgage after completion, so you close once and pay one set of closing costs.
How do construction loan draws work for a new build?
- Funds are released in stages tied to milestones such as foundation and framing, after inspections and lien waivers confirm progress and payment protection.
What Pembroke permits can delay construction loan funding?
- Building permits, Planning Board approvals, Conservation Commission filings for wetlands, and Board of Health septic approvals can affect the timing of draw releases.
Do I need a Title 5 septic plan for lender approval?
- If the lot is not on municipal sewer, lenders commonly request percolation results and an approved septic design before releasing major funds.
What down payment is typical for construction loans?
- Many lenders require 15 to 25 percent equity in the total project, with exact requirements based on your credit profile and loan program.
When does a construction loan convert to a mortgage?
- After final inspections, a certificate of occupancy if required, and a confirming appraisal, your loan can convert to permanent financing or be paid off by a new mortgage.
