If you plan on building a new home, purchasing land, or adding a room to your existing home, you should consider getting a construction loan. It is not as difficult as you think to get one.

Construction loans are short-term, high-interest loans that you take out to finance the construction of a house. These loans have a long history, with roots dating back to the American Frontier. The industry has clearly evolved over the years, but many of the same principles still apply.

Most construction loan lenders require substantial down payment, usually at least 20 percent.

Construction loans are unsecured, which means that the lender has no recourse to the borrower if the borrower defaults. If you don’t have collateral to pledge, you’ll have to come up with an additional cash deposit.

Down payment, collateral and credit score will determine whether you get a construction loan.