Understanding your options for new home construction financing is key when starting the journey to build your ideal home. Unlike a traditional mortgage, construction financing is tailored to the unique process and challenges of home building.
New Home Construction Financing – Your Ultimate Guide
What Is Construction Financing?
New home construction financing refers to a loan explicitly used to fund the cost of building a home. It covers expenses like materials, labor, permits, and land development. The money is typically released in phases as construction progresses, based on inspection milestones.
Main Financing Options
There are several ways to finance your construction project, each with its benefits and requirements:
- Construction-to-permanent loans – Start as construction loans and convert into traditional mortgages.
- Construction-only loans – Short-term loans that require separate permanent financing after construction.
- Owner-builder loans – For those acting as their own general contractor.
- Government-backed programs – FHA and VA loans provide flexible options for qualified borrowers.
Choosing the right financing depends on your timeline, budget, and whether you already own the land.
Down Payment and Interest Rates
Construction loans generally require higher down payments—typically between 20% and 25%. Interest rates are also slightly higher than traditional home loans, reflecting the higher risk for lenders. During construction, most borrowers pay interest-only on the amount drawn.
Financial Planning and Pre-Approval Tips
Know Your Budget
Your lender will ask for a detailed construction budget, including labor, materials, permits, architectural plans, and a contingency buffer (usually 10%). This estimate is also critical for understanding the new home construction costs and ensuring the financing covers the full scope.
Get Pre-Approved
To secure your loan, prepare:
- Proof of steady income
- Solid credit history
- Comprehensive building plans
- Timeline and permits
- Licensed contractor agreement
Getting pre-approved early simplifies everything and helps avoid funding delays.
How BH Solutions, LLC Helps You Finance Smart
With over 14 years of experience, BH Solutions, LLC partners with clients and lenders to streamline the construction process. We assist with budget planning, provide professional estimates, and coordinate with financial institutions. Serving Danbury, Greenwich, Fairfield, and Stamford, we’re your trusted home remodeling and construction team.
Let’s Start Planning Your New Home
Let BH Solutions, LLC guide you through the new home construction financing process from start to finish. Our team is available 24/7 and ready to support your vision—call us today at 📞 (203) 297-6140 to schedule a free consultation.