You’ve got the vision: a home designed just for you, tailored to your lifestyle and preferences. But as you dive into the details, you might be asking yourself, “Can I mortgage a custom home?” The good news is yes, you absolutely can! However, the process is a little different from buying an existing home. Let’s break it down so you know what to expect and how to get started.

When you hear “mortgage,” you probably think of a traditional home loan used to buy a move-in-ready property. With a custom home, it’s a two-step process:

• Construction Loan: A short-term loan that covers the cost of building your home.
• Permanent Mortgage: Once the home is complete, the construction loan converts into a traditional mortgage, or you take out a new one.

This two-phase approach ensures you have the funds to build your dream home and a long-term loan to pay it off.

A construction loan is specifically designed to fund the building process. Here’s how it typically works:

• Disbursements (Draws): The loan is paid out in stages as construction progresses, such as after the foundation is poured or the framing is completed.
• Interest-Only Payments: During construction, you’ll typically pay only the interest on the amount drawn.
• Loan Duration: These loans are short-term, usually lasting 12-18 months.

1. Construction-to-Permanent Loan

This loan combines the construction loan and mortgage into one. Once construction is finished, the loan automatically converts to a permanent mortgage.

• Pros: One application and closing process.
• Cons: May require a larger down payment.

2. Standalone Construction Loan

This is a separate loan for construction only. You’ll need to apply for a mortgage once the home is complete.

• Pros: More flexibility to shop for mortgage terms later.
• Cons: Requires two closings and potentially higher fees.

1. Get Pre-Approved

Before you even start designing your custom home, get pre-approved for a construction loan. Lenders will evaluate your income, credit score, and down payment to determine your borrowing capacity.

2. Choose Your Builder

Most lenders require you to work with a licensed and experienced builder, like HoneyB Construction. We’ll provide the documentation your lender needs, including detailed plans, a construction timeline, and cost estimates.

3. Secure the Loan

Once approved, your lender will issue a construction loan. Funds are released in stages as construction milestones are met.

4. Transition to a Mortgage

After your home is complete, you’ll either convert your construction loan to a permanent mortgage or apply for a new one. The permanent mortgage will have fixed monthly payments based on the remaining loan balance.

1. Work with a Trusted Lender

Choose a lender with experience in construction loans. They’ll guide you through the process and help avoid common pitfalls.

2. Be Realistic with Your Budget

Include a contingency fund in your loan amount for unexpected expenses. Building a custom home often comes with surprises, and it’s better to be prepared.

3. Keep Your Credit in Check

Avoid taking on new debt or making big purchases during the loan process. Your financial stability is key to securing favorable terms.

4. Stay Involved

Regular communication with your builder and lender ensures the project stays on track and within budget.

At HoneyB Construction, we’ve worked with countless clients to bring their custom home dreams to life. We’ll collaborate with your lender to make the process seamless, providing detailed plans and regular updates to keep everything running smoothly.

Ready to take the first step? Give us a call, and let’s start building your future—one brick at a time.