With a custom home, the financing will be more complicated. There will be two parts to it: the construction loan and the permanent loan. You will most likely obtain both from the same financing institution. Due to the extra expense and risk of the construction loan, there will be premiums attached to the financing. The Builder will be paid according to an agreed to schedule that will be detailed in the contract. The work should be inspected and passed before payments are made. The inspections can be performed by an architect (if there is one involved) and/or a home inspector.

• When construction is completed, the construction loan converts to a permanent mortgage at a negotiated rate and terms.
• Builder financing: Depending on the level of custom building, the Builder may offer Builder financing. The more custom the home is and the lower the volume produced, the less likely the Builder is to offer financing.
• Rate locks: If you are nervous about rising interest rates, you should also shop for a lender who will lock in the permanent loan rate during the construction period. Typically, there is a fee for long-term rate locks and the longer the lock, the higher the fee. This can vary greatly from lender to lender. Beware that if the Builder goes past the lock-in period, the rate may expire and you may not have recourse against the Builder.