Building instead of buying
Construction financing gets more questions and more confusion than almost anything else I work on, mostly because people assume it works like a purchase loan with extra paperwork. It does not.
The lender is underwriting your builder and your plans as much as they are underwriting you. Funds release in stages as the build hits milestones, foundation, framing, and so on, rather than all at once at closing. A one-time close structure rolls the construction loan and the permanent mortgage into a single closing, so you are not qualifying twice or paying two sets of closing costs.
Central Texas has enough new construction, especially out toward Dripping Springs and Driftwood, that I see this kind of purchase regularly. Knowing which lenders on the panel actually want to do construction, and which builders they already have a relationship with, changes how smoothly this goes.
Quick facts
- Down payment
- Typically 10% to 20%, varies by lender
- Credit guidelines
- Generally 680+
- Typical timeline
- Build timeline varies, closing itself typically 45 to 60 days
- Occupancy
- Primary residence, most commonly
What it usually takes
- A builder and a set of plans the lender can underwrite
- A larger down payment than a standard purchase, the exact number depends on the lender
- Strong documentation of income and reserves through the build period
- Patience for a longer, staged closing process
Guidelines vary by lender, and I shop across more than 40 of them. Missing one of these is a reason to talk, not a reason to assume the answer is no.
See the estimated mathThis is not a commitment to lend. All loans are subject to credit approval, income and property verification. Rates, terms, and programs are subject to change without notice. Nook Lending is powered by MPA Home Loans. Jennifer Ferrara, Loan Officer, NMLS #2781982. MPA Home Loans NMLS #2778343. Equal Housing Opportunity.