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Financing a Custom Home Build in Plano: What's Different and What to Expect

Building a custom home in Plano, Texas, offers an exciting opportunity to create your dream living space tailored to your unique preferences and lifestyle. However, financing a custom home build differs from purchasing an existing home or building a standard spec home. In this blog post, we'll explore what makes financing a custom home build in Plano unique and what you can expect during the process.

Understanding the Basics of Financing a Custom Home Build

1. Construction Loans vs. Traditional Mortgages

Unlike traditional mortgages used to purchase existing homes, financing a custom home build typically involves a construction loan. Construction loans are short-term loans that cover the cost of building a home, and they differ from standard mortgages in several ways:

  • Draw Schedule: Construction loans disburse funds in stages, known as draws, as the home is built. This differs from a lump-sum payment in a traditional mortgage.

  • Interest Rates: Construction loans often have higher interest rates than traditional mortgages due to the increased risk associated with construction projects.

  • Shorter Terms: Construction loans typically have shorter terms, typically ranging from six months to two years, compared to the 15- to 30-year terms of traditional mortgages.

2. Down Payments and Equity Requirements

Financing a custom home build usually requires a larger down payment compared to purchasing an existing home. Lenders typically require a down payment of 20% to 25% of the total project cost. Additionally, lenders may require the borrower to have significant equity in the project to mitigate risk.

3. Approval Process and Documentation

The approval process for a construction loan is more involved than that of a traditional mortgage. Lenders require detailed documentation, including architectural plans, construction contracts, and cost estimates from builders. Borrowers must also have a solid credit history and sufficient income to qualify for the loan.

What to Expect When Financing a Custom Home Build in Plano

1. Pre-Approval Process

Before embarking on your custom home build journey, it's essential to get pre-approved for a construction loan. This involves submitting financial documents to a lender, who will assess your creditworthiness and determine the loan amount you qualify for.

2. Working with a Lender Experienced in Custom Builds

When choosing a lender for your custom home build, opt for one experienced in financing construction projects. Look for lenders familiar with the Plano market and accustomed to working with custom home builders in the area.

3. Budgeting for Contingencies

Custom home builds often encounter unexpected costs and delays. It's crucial to budget for contingencies to cover unforeseen expenses that may arise during construction. Experts recommend setting aside 10% to 20% of the total project cost for contingencies.

4. Monitoring Construction Progress

Throughout the construction process, your lender will conduct inspections to ensure the project is progressing according to plan. Funds will be disbursed in stages based on these inspections, known as draw requests, to pay for labor and materials.

5. Transition to Permanent Financing

Once construction is complete, you'll need to transition from your construction loan to permanent financing, such as a mortgage. This involves refinancing the construction loan into a traditional mortgage, which may have different terms and interest rates.


Financing a custom home build in Plano requires careful planning, thorough documentation, and working with experienced professionals. By understanding the unique aspects of financing a custom home build, you can navigate the process with confidence and bring your dream home to life in one of Texas's most vibrant communities. If you're considering embarking on a custom home build journey in Plano, consult with a knowledgeable lender and builder to ensure a smooth and successful experience.

About us: Plano New Construction Expert Real Estate Agent

As a Top Real Estate Professional in Plano & Austin area, I understand the challenges that arise when buying a new construction home. There are over 50 builders in the Austin area. I work with most of the new home builders in Austin and understand how various builders operate. I am familiar with the options they offer, current incentives and I frequently visit the upcoming communities they are building. I guide my clients through all steps of the new home construction process and aggressively protect their interests in the transaction.

As a holder of top real estate industry certifications and designations like CRS, ABR & GRI, I can offer my clients experience as a Buyer's Agent in Plano and REALTOR®, top Industry Customer Service, in-depth, up-to-the-minute and comprehensive market knowledge; honesty, integrity, dedication, and professionalism in my business.

Whether you are a first time buyer in Plano looking to buy a home in Austin or Plano or whether you are relocating to Plano from California or moving your entire family from areas like San Francisco, Fremont, Palo Alto, Los Angeles, San Diego in California due to job transfer with your company, I can help you find a new construction home in Plano. Our relocation team eases the transition - whether you are moving across town or across the globe. We will work with you to find an area that best suits your professional, family and lifestyle needs. We have all the tools you need to help your home search. Whether it is video previews of homes, extended work hours, digital signatures for documents or more, we can make this process as comfortable as possible no matter where you are located.

What is most important to you in your new construction home in Plano? Send us an email at info@NitinGuptaDFW.com or give us a call at (469) 269-6541 to schedule a no obligation consultation. We’ll give you honest advice about Plano community that you can use to help make your home buying decision.



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