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How Do You Finance A New Custom Home Build?

August 31, 20232 min read

With an array of financing options available, let's delve into the most prominent ones and understand their dynamics.

1. Cash Payments: Not What You Think!

When we say "cash," we don't imply walking up to the builder with a duffel bag full of money. Rather, this denotes the funds you've accumulated over time in your savings, checking, or even retirement accounts. This is essentially when you have the full amount, say for a $750,000 house, ready and waiting. However, it's crucial not to hand over all this money to your builder immediately. Instead, the funds typically sit with a title company that oversees the builder's invoices, ensuring you're not charged excessively.

2. TurnKey Financing: The Builder-Fronted Option

TurnKey financing is when the builder takes on the responsibility of financing the entire construction phase. Essentially, they either procure the loan or use their funds to facilitate the build. Once the construction is complete, you, as the homeowner, secure a traditional mortgage or other financing mechanism to settle the long-term loan. This method is prevalent among large-scale builders, but smaller ones like Sanctified Homes offer it too. However, it’s not universal, so it’s essential to discuss this with your chosen builder.

3. Construction Loans: The Traditional Route

Here, you approach a bank or financial institution for a loan exclusively tailored for construction. They'd typically require detailed plans, spec sheets, and other associated costs. Upon approval, the bank works in tandem with a title company to manage the funds, disbursing them based on the builder's invoiced progress. For many, construction loans are the go-to, accounting for a significant majority of custom home builds.

Other Alternatives: Beyond the Norm

While the aforementioned are standard routes, there's no shortage of alternative methods. Some potential homeowners rope in a close relative to co-sign a loan, while others might resort to hard money lenders. The route you choose should align not just with your financial standing, but also your long-term goals and comfort levels.

Which Method Suits You?

The best financing method largely hinges on individual preferences and circumstances. For some, using cash reserves might seem viable, but those funds might yield better returns if invested elsewhere. Whether it's TurnKey, construction loans, or any other method, the goal is to determine what aligns best with your aspirations and financial health.

If you're hungry for more insights into the home-building realm, explore Blessed Build Foundation for resources that demystify the construction process. And for those keen on exploring more about Sanctified Homes, wisconsinhomebuild.com is your go-to hub.

Comments, questions, or just curious? Drop us a text message. Don't forget, raising the standard is not just a motto; it's a lifestyle.

If you want to learn more about Sanctified Homes & Construction, checkout our homepage at WisconsinHomeBuild.com, or book a call directly on my calendar here.

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TJ Vitense

Founder of Sanctified Homes and Construction & the Blessed to Build Foundation, TJ believes in raising the industry standards. With his company Strategic Real Estate Experts, he helped hundreds of families buy and sell homes. And, now manages new home construction as one of Wisconsin's best home builders.

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Honesty is always the best policy, and this is the policy we swear by. We aim to be as transparent as possible with our clients when building their homes.

  • We have no hidden fees or surprises.

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