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Posted by Melissa Lynn Galland on Aug 29, 2019 6:37:00 AM
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For most people, a new custom home build requires outside financing. Much like getting a mortgage for an existing home, unless you can pay with cash, you will need to source other funding. There are several options for financing the construction of a new home. The one you choose will depend on your individual financial situation and personal preferences.

The two primary sources of funding a custom home build are a new-construction loan and builder financing. You might also be able to save with new-construction tax credits.

New-Construction Loan

You can work with a local bank to secure a construction loan to finance your new custom home. Most new-home construction loans are designed to provide short-term funds during the building process, with a term of 6-12 months. After the custom home construction is complete, the loan is then converted into a more traditional long-term loan. Not all banks offer new-construction loans, so you might have to shop around to find one.

The advantages of getting a new-construction loan with a bank include:

  • You build a relationship with a local bank.
  • The bank must also approve the builder, which helps you with the vetting process.
  • Banks offer a wide variety of loan types.

Every lender is different, so it’s a good idea to talk to at least a few banks to compare their rates, fees, and processes. You will need to gather a lot of information for the approval process, including personal financial information, building-lot details, builder credentials and proof of insurance, building plans and specifications, a line-item budget, and a construction contract. Because it can seem like such an onerous process, many people choose to simplify financing by working directly with their builder.

Meet with a few different lenders to get pre-approved. This is the best way to identify your true buying power. 

- Debra Kwiat, Real Estate Agent 

Builder Financing

Many builders have partner companies or subsidiaries that allow them to offer financing for new custom homes. Some of the advantages of going with builder financing are:

  • The rates might be lower than banks’ rates.
  • The approval process is typically faster.
  • They have a lot of experience with new-construction loans.

The builder’s relationship with the financing institution can also streamline the inspection process, allowing you to draw funds more quickly to keep the project moving. Many builders with financing companies are also able to save you money by bundling costs into a single package.


Many buyers lose the first offer on their dream home because they're not prepared and didn't follow through providing their mortgage rep with the necessary info to get a strong approval letter; The offer is then shot down.

To ensure your best chance for approval, work early and often with your broker to make sure he or she has all the information they'll need. 

- Jeff Perkins,  | 


New-Construction Tax Credits

It’s always a good idea to see what tax credits might be available before you build. Each state has different programs—and they vary from year to year—but you might be able to get rebates for installing energy-efficient appliances or conforming to Energy Star building standards. Ask your builder if it is aware of any tax credits and check with federal, state, and local agencies to see what programs are available. The greatest advantage of tax credits and rebates is that you might be able to increase your budget and build more for your money.  

Adair Homes Partner Financing

Adair Homes created Adair Financial Services (AFS) to provide financing programs to help our customers meet their goals of home ownership. The team at Adair Financial Services has helped thousands of Adair Homes families obtain financing. In fact, they have probably done more construction loans than almost any other lender because they specialize in new builds. AFS offers 12-month construction loans at competitive rates with little to no down payment. Permanent financing and refinancing programs are also available.

These loans can be used for both purchasing property and building your new home, so you don’t need separate mortgages for the land and the house.

In addition to having a financing partner like AFS, one of the most compelling reasons to build with Adair Homes is the ability to build immediate equity. Last year, the average equity position for our customers at the end of the construction process was in the range of 23-25 percent. Remember that this is typically with a construction loan with a low down payment. The program is tailored to take advantage of the equity created in the homebuilding process and apply that equity as a down payment on the project.

Unlike other lenders, the team at AFS has extensive knowledge of the Adair Homes process and close connections with the Home Ownership Counselors and estimators. This means that the process to secure a loan is more streamlined and often goes more quickly.

Contact us today to learn more about how Adair Homes and Adair Financial Services can help you build a custom home.

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