Financing Your Custom Home

Most Rise Construction Co. clients use construction loans to finance their custom homes. Here's what you need to know about construction financing, how it works, and what to prepare.

How Construction Financing Works

Construction loans are short-term loans that fund your home build. Unlike traditional mortgages (which pay a seller in full at closing), construction loans release funds in stages as your home is built.

Here's the basic structure:

Your lender approves you for a specific loan amount based on your finances and the appraised value of your completed home. Funds are held by the lender and released in "draws" at construction milestones: foundation completion, framing, rough-in, finishes, final completion.

Rise Construction Co. submits draw requests to your lender as each phase is completed. The lender inspects the work, confirms completion, and releases payment. You typically pay interest-only on funds already drawn during construction.

When your home is complete and you receive a certificate of occupancy, the construction loan converts to a permanent mortgage (or you refinance into a traditional mortgage, depending on loan type).

Types of Construction Loans

Construction-to-Permanent Loans

One loan that covers both construction and your permanent mortgage. You close once, lock your interest rate upfront, and the loan automatically converts to a traditional mortgage when construction completes.

Best for: Buyers who want to lock in rates and avoid two closings.

Construction-Only Loans

A short-term loan (typically 12 months) that covers construction. When your home is complete, you refinance into a separate permanent mortgage.

Best for: Buyers who want flexibility to shop for mortgage rates after construction or who expect rates to drop.

Owner-Builder Construction Loans

Specialized loans for buyers acting as their own general contractor. Rise Construction Co. clients don’t need these—you’re hiring a licensed contractor, not self-managing.

What Rise Construction Co. Does

Rise Construction Co. doesn’t provide financing or approve loans. 

What we do:

Coordinate with Your Lender: We submit draw requests at project milestones, provide documentation for inspections, and answer lender questions about construction progress.

Provide Cost Documentation: We give you detailed, itemized pricing once your design is finalized. Your lender uses this for loan approval and appraisal purposes.

Work with Your Timeline: We schedule construction around your loan closing date and coordinate draws to keep the build moving without payment delays.

Answer Questions: If you’re exploring financing options before choosing a lender, we explain how construction loans work with custom home builds and what documentation you’ll need.

What You'll Need to Apply

Construction lenders typically require:

  • Financial Documentation: Tax returns, pay stubs, bank statements, credit report. Standard mortgage application requirements.
  • Land Ownership or Purchase Agreement: You must own the land or have a contract to purchase before most lenders approve construction loans.
  • Construction Contract: Detailed contract from Rise Construction Co. showing scope, timeline, and cost breakdown.
  • Floor Plans & Specifications: Finalized design showing what’s being built.
  • Builder Credentials: Proof that Rise Construction Co. is licensed, insured, and established (lenders verify this directly).

 

Your lender will provide a complete application checklist based on their specific requirements and your financial situation.

Understanding Down Payments & Loan Terms

Down Payment: Most construction lenders require 10-20% down. This can include the value of land you already own (if owned free and clear) or cash down payment.

Interest During Construction: You typically pay interest-only on funds already drawn. If $200,000 has been released and your interest rate is 7%, you’re paying interest on $200,000, not the full loan amount.

Loan-to-Value Ratios: Lenders typically loan up to 80-90% of your home’s appraised completed value. The appraisal is based on your finalized plans and comparable home sales.

Credit Requirements: Construction loans generally require good credit (typically 680+ score, though requirements vary by lender).

Your lender explains specific terms, rates, and requirements based on your financial profile.

Timeline: When to Apply for Financing

Before Your Consultation

You don’t need loan approval before talking to Rise Construction Co. Come discuss your vision and understand costs first.

After Design is Finalized

Once you’ve selected and customized your floor plan, Rise Construction Co. provides detailed pricing. Use this to apply for financing.

During Pre-Construction

While Rise Construction Co. handles permitting and engineering (typically 4-8 weeks), you’re working with your lender on loan approval and appraisal.

Construction Loan Closing & Funding Process

Construction loan closing typically happens just before construction begins. Funds are ready when we break ground.

Choosing a Lender

Rise Construction Co. works with clients using various lenders—national banks, local credit unions, and specialized construction loan lenders. We don’t require you to use specific lenders.

Lenders our clients have successfully worked with:

  • Brannen Bank: Local bank with construction loan experience
  • Waterstone Mortgage: Specialized construction-to-permanent financing and VA New Construction Loans

     

What to compare when evaluating lenders:

  • Interest rates and fees
  • Construction-to-permanent vs. construction-only options
  • Down payment requirements
  • Draw schedule flexibility
  • Lender responsiveness (critical during construction)
  • Experience with custom home construction loans


Some lenders specialize in construction financing and understand the draw process well. Others handle construction loans occasionally and may have slower draw approvals. Lender responsiveness affects construction timeline—delayed draw approvals delay your build.

Final lender selection is your decision based on rates, terms, and service.

Frequently Asked Questions

Does Rise Construction Co. provide financing?
No. Rise Construction Co. doesn’t provide financing or approve loans. We work with your lender throughout construction, submitting draw requests and coordinating inspections, but you secure financing independently through banks or credit unions.
Most construction lenders require 10-20% down. If you own land free and clear, its value can count toward your down payment. Your lender determines specific down payment requirements based on your financial situation and loan type.
Most lenders require you to own the land (or have a purchase contract) before approving construction financing. Some lenders offer combined land-purchase-and-construction loans, though these are less common.
Construction loan credit requirements vary by lender, but most require scores of 680 or higher. Your lender evaluates your complete financial profile—credit score, income, debt-to-income ratio, and down payment.
Approval timelines vary by lender, typically 30-45 days from application to closing. This overlaps with Rise Construction Co.’s permitting and engineering phase, so loan approval and site preparation happen simultaneously.
If the appraised value is lower than your construction cost, you’ll need to either increase your down payment to cover the gap or adjust your design and specifications to reduce costs. Rise Construction Co. can help you identify cost adjustments if needed.
You typically pay interest-only on funds already drawn during construction. Full principal-and-interest payments begin after construction completes and the loan converts to a permanent mortgage (or you refinance into a traditional mortgage).
Most construction loans include contingency time beyond the estimated completion date. If construction extends beyond the loan term (due to weather delays, permitting issues, or other factors), your lender can typically extend the construction period. Rise Construction Co. provides realistic timelines to minimize this risk.

Ready to Understand Your Total Investment?

Construction financing is just one part of building your custom home. Let's discuss your overall project—budget, timeline, and how the financing process fits in.

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