Financing Options for Your Custom Home

June 8, 2024

Building your dream home is exciting but complex. Custom home financing is key for everything to go smoothly. Unlike buying an existing house, custom home building involves different loans. You’ll deal with loans for buying land, the construction phase, and finally, getting a mortgage.

It’s vital to know about the different loans you might need. Land loans let you buy the plot for your home. They usually need bigger down payments and have varied terms. You can expect lot loan periods from two to twenty years, with fast approvals within 30 days.

Then, you need construction loans for the actual building part. These are short-term with interest rates 1%–2% higher than usual. Down payments for these loans range from 20% to 30% of the total loan value. In the first 12 months, you might only have to pay interest. You could also consider construction-to-permanent loans, which simplify moving to a mortgage later but require a big down payment.

Turning your financing into a traditional mortgage is the final step after your home is built. These mortgage loans can have terms up to 30 years. They may be fixed or have adjustable rates. While some banks offer combined loan packages, usually you’ll handle multiple loans. For smooth handling, you’ll need detailed records and advice from financial professionals.

Key Takeaways

  • Lot loan periods typically range from 2 to 20 years.
  • Construction loans require a 20%-30% down payment and have short-term variable interest rates.
  • Traditional mortgage loans can last up to 30 years with fixed or variable rates.
  • Financial institutions may offer construction-to-permanent loans to combine construction and mortgage phases.
  • Detailed documentation is essential for loan approval in custom home financing.

Understanding Custom Home Financing

Building your dream home means knowing different financing options. You have to purchase the land and then build the house. We’ll look into loans for land, construction, and mortgages crucial for custom home building.

Land Loans

Land loans help buy the plot for your home. Banks and credit unions provide these loans. The terms depend on the land’s value, where it’s located, and your down payment. Loan terms range from 2 to 20 years, with fixed or variable interest rates.

When buying land, think about how close it is to cities, its future value, and local schools. Also, consider zoning laws. Since land loans are riskier, they have higher interest rates than mortgage loans. Learn about financing your custom home here.

land loans

Construction Loans

Construction loans pay for home building. They last 12 to 18 months. You need a 20% to 30% down payment. Interest rates vary but are above the prime rate. Payments are made in parts, checked by an inspector.

You need approval for a permanent loan before getting a construction loan.

  • Standalone construction loans
  • Construction-to-permanent loans

construction loans

The builder must meet the lender’s requirements. They need a track record of completed projects. Signed lien waivers confirm that subcontractors and suppliers get paid. During building, you pay interest only. This keeps monthly payments low.

Mortgage-Based Loans

After building your home, the next step is a mortgage. A construction-to-permanent loan becomes a regular mortgage without extra costs. Standalone construction loans mean applying for a new mortgage. Mortgage terms can go up to 30 years. Rates depend on the home’s value and your finances.

For expensive homes, consider jumbo mortgages or home equity lines of credit. The main way to pay off construction loans is through a permanent mortgage. Getting this loan early on helps a lot.

Custom Home Financing Options with Clyde & Co.

At Clyde & Co., we’re experts in custom financing for home builders in Northern Utah. We know all about loans for homes, from buying land to construction, and then getting a mortgage.

Looking into Clyde & Co. custom home financing, bridge loans, or home equity loans? We make sure you get good deals that meet your goals. We even have investment property financing for your real estate projects.

We work closely with top Northern Utah home builders. Our goal is to make financing easy for your custom home project. We guide you through choosing the best financing option and getting loan approval fast.

If you’re thinking about financing for your custom home, we’re here to support you. Contact Clyde & Co., and let’s make your dream home a reality.


Financing a custom home is a big step. It involves buying the lot, paying for construction, and getting a mortgage. It’s important to plan your finances well and know about different loans. Lot loans can last from 2 to 20 years. You might need to make a 20% down payment to secure the loan.

The construction phase needs a construction loan. This can last 12 to 18 months. You’ll likely need a 20% to 30% down payment. Interest rates are usually higher during this time. The money for the loan is given out in parts as the building progresses. You must usually be pre-approved for a mortgage before getting a construction loan.

After your home is built, you’ll probably get a long-term mortgage. This can last up to 30 years. Mortgage rates and terms differ a lot. It depends on how much the finished home is worth and your finances. Picking the right financial help for your dream home is key. At Clyde & Co., we help you at every step of building your custom home. Contact us for help and to find the best financing for your dream home in Northern Utah.


What is custom home financing?

Custom home financing means getting loans for buying land, building, and getting a mortgage for a custom home. This is different from regular home loans, which only cover buying pre-built houses.

How do lot loans work?

Lot loans help you buy the land for your dream home. They need bigger down payments and have higher interest rates than regular mortgages because they’re riskier.

What are construction loans?

Construction loans pay for your custom home’s building costs. They’re short-term and pay out as you hit building goals. They can turn into a mortgage after you finish building.

Can I get a mortgage for my custom home after it’s built?

Yes, you can get a mortgage after your home is built. Construction-to-permanent loans change into a mortgage without extra fees. Standalone loans need a new mortgage application when done.

What types of construction loans are available?

You can choose from standalone construction loans and construction-to-permanent loans. For special cases, renovation loans or government programs for fixing up homes might fit your needs.

What documentation is required for custom home financing?

You need lots of documents to get a loan, like ID, proof of income, bank statements, tax returns, and your builder’s approval.

What factors should I consider when selecting a homesite?

Think about how close it is to cities, if the land might go up in value, how good the schools are, and the zoning laws. These affect your loan and the land’s future worth.

How do home equity lines of credit (HELOC) work in custom home financing?

HELOCs let you use the value of your current home to pay for the new one’s building costs. It’s flexible, so you take money when you need it during construction.

What’s the difference between a jumbo mortgage and a traditional mortgage?

Jumbo mortgages are for big loans that are more than the usual limit. They have tougher rules and might cost more in interest than regular mortgages.

How does investment property financing differ for custom homes?

Financing for investment properties uses loans for homes you won’t live in but might rent out or sell. These come with different rules, higher rates, and bigger down payments.

What is a bridge loan?

Bridge loans help cover the time between buying your new place and selling your old one. They’re helpful when you’re building a new house and moving out of the old.

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