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Construction Financing for Custom Homes

Build your dream home with confidence

Embarking on the journey to build your own home is an exciting endeavor, and understanding the financial aspects is crucial. Construction financing is a specialized loan designed to cover the costs associated with building a new home, from purchasing land to completing the final touches.

What Is Construction Financing?

Construction financing is a short-term loan that provides funds for the construction of a home. Unlike traditional mortgages, which are used to purchase existing homes, construction loans are disbursed in stages as the building progresses. These funds cover various expenses, including land acquisition, labor, materials, permits, and inspections.

How It Works

Once approved, the lender releases funds in phases, known as "draws," based on the completion of specific construction milestones. Before each draw, an inspection is typically required to verify that the work meets agreed-upon standards. Common stages include:

  • 1. Foundation

    Laying the groundwork for the structure.

  • 2. Framing

    Erecting the skeletal structure of the home.

  • 3. Roofing and Exterior

    Completing the outer shell.

  • 4. Interior Finishes

    Installing drywall, flooring, and fixtures.

  • 5. Final Completion

    Ensuring all aspects are finished and up to code.

Frequently Asked Questions

  • Do I have to choose a specific lender to work with you?

    No, you’re free to work with any lender you prefer. If you’d like, we can connect you with a trusted partner.

  • I have some lending questions, who do I talk to?

    We’re happy to connect you with a trusted partner we’ve worked with for years. They know construction loans inside and out and can help make the process smooth, so you can focus on building your dream home without worrying about the details.

  • What is loan pre-qualification?

    Loan pre-qualification is an initial assessment by a lender to estimate how much you might be able to borrow for your custom home. It gives you a general idea of your budget before you start the building process.

  • Do I need to be pre-qualified before discussing a home price with you?

    While not required, pre-qualification helps you understand your budget and can make the planning and financing process smoother.

  • How much home can I afford?

    Your financial situation, down payment, repayment period, loan product, and credit history will all factor in determining what you can afford. A lending specialist can review your individual situation and help answer these questions, guiding you to the best financing option for your custom home.

Close-up of a hand holding keys with a miniature wooden house in the background, symbolizing real estate investment.

Construction Loan Support Made Easy

Highlands Residential Mortgage offers a wide variety of loan options specifically designed for those looking to build their dream home. Conveniently located right next to our office, Highlands makes it easy for our clients to meet with their loan specialists, ask questions, and get the support they need—just steps away. If you’re interested in learning more about construction financing, please reach out to our trusted partner, Highlands Residential Mortgage, to get started today.