Financial options for custom home building.
Most families build with a construction loan that bridges from groundbreaking to permanent financing. We work with multiple lenders and can guide you through the process, so you understand costs, timelines, and next steps before any commitment.
How people typically finance custom builds.
The right financing structure depends on your timeline, down payment, and personal preferences. Here are the most common approaches.
Most common approach
Borrow against the home's completed value during construction. Funds are disbursed in stages (foundation, framing, etc.). Upon completion, the construction loan converts to a permanent mortgage or is paid off with your own financing.
Interest rate: Typically variable during construction (adjusts monthly)
Term: 12–24 months
Pros: Borrow what you need when you need it; lower carrying costs during construction
If you already own a home
Short-term loan that bridges gap between buying a new lot and selling your current home, or between home sale proceeds and new construction close. Useful if you need liquidity upfront.
Interest rate: Typically higher than construction loans (premium for flexibility)
Term: 6–12 months
Pros: Flexibility; overlap period manageable; avoids contingent offers
Lock in one rate
Single loan that starts as construction financing and automatically converts to permanent mortgage upon completion. Simplifies process and locks in rate upfront.
Interest rate: Fixed (locked upfront)
Term: During construction + 30 years permanent
Pros: Single closing; rate certainty; less paperwork
If you have equity
Pay all-cash from savings, or refinance an existing home to fund construction. Simplest path if you have the capital, but ties up resources during build period.
Interest rate: N/A (cash) or rate on refi loan
Term: N/A or standard mortgage terms
Pros: No loan process; full ownership; no lender approval needed
What to plan for financially.
Beyond the home price, there are additional costs to account for. Here's a breakdown of typical expenses.
Loan-related costs
- Loan origination fee: 0.5–1.5% of loan amount
- Appraisal: $400–800
- Underwriting/processing: $500–1,500
- Title insurance: $800–1,200
- Title search: $200–400
- Interest during construction: Variable (depends on loan size & timeline)
Non-loan costs
- Lot purchase: $30k–100k+ (depends on location)
- Architect/designer (if custom): 5–10% of construction cost
- Permits & inspections: $2k–5k
- Homeowners insurance: $1.5k–3k/year
- Survey & soil testing: $500–2k
- Temporary utilities during build: $1k–3k
Pro tip: Most of these costs are built into your total project budget and financed through your construction loan. Ask your lender which costs they will and will not finance.
Lenders we work with regularly.
We have established relationships with construction-savvy lenders who understand custom builds and move efficiently through approvals.
Major banks
- Chase Bank – Construction & construction-to-permanent
- Wells Fargo – Construction & bridge loans
- Bank of America – Construction & permanent mortgages
- US Bank – Construction loans for custom builds
Regional & specialty lenders
- Inland Bank & Trust – Chicago-area construction specialist
- MB Financial – Custom home construction loans
- Northbrook Bank & Trust – Local construction expertise
- Guaranteed Rate – Mortgage broker with construction options
We'll connect you: When you are ready, we can introduce you to lenders we trust or you can shop independently. Either way, we coordinate with your lender throughout construction to ensure smooth draws and approvals.
Financing questions answered.
Most lenders require a minimum FICO score of 680–700 for construction loans. Some will go lower (650+) with a larger down payment. The higher your score, the better your interest rate. We recommend checking your credit early so you have time to improve it if needed.
Construction loans typically require 15–25% down payment. Your exact down payment depends on your credit, loan amount, and lender. For example, on a $700k home with a $150k down payment, you'd finance $550k. Your lender will confirm required down payment during pre-approval.
Yes, but only if the changes fit within your construction loan limit. When you request a change, your lender must approve it and it reduces your available draws. This is why we build allowances into pricing upfront—so you know what you can spend before construction starts. Major scope changes may require a loan amendment.
With our fixed-price structure and detailed allowances, overruns are rare. If they do occur, you have two options: (1) cover the overage with personal funds, or (2) request a loan amendment to increase the loan amount (if your lender approves and your income supports it). This is why detailed upfront pricing matters—it prevents surprises.
With a standard construction loan, you typically make interest-only payments on funds drawn. For example, if $100k is drawn, you pay interest on $100k that month. Some construction-to-permanent loans defer all payments until permanent conversion. Your lender will explain your specific payment schedule.
A construction loan funds in stages as the home is built and includes interest-only payments during construction. A regular mortgage is a fixed-term loan against a completed home with principal + interest payments. Construction loans typically convert to mortgages once the home is complete, or you refinance with a permanent loan of your choice.
You can lock in a rate with a construction-to-permanent loan at origination, which carries that rate through permanent conversion. With a standard construction loan, you'd lock rates closer to construction completion (typically 30–60 days before). Rate locks are available in 30, 45, 60, and 90-day periods. Longer locks cost more but provide certainty.
Let's discuss your financial picture.
We can walk you through financing options, connect you with trusted lenders, and answer questions about costs. No obligation—just clarity.
Financial guidance
- Comparing financing options
- Connecting with construction-savvy lenders
- Understanding loan terminology
- Planning total project budget
- Answering lender-related questions
Let's talk
We'll discuss your situation, answer financing questions, and recommend next steps. This conversation helps you enter the loan process confident and informed.