Financing Your Custom Build: FAQs

Building a custom home is one of the biggest financial decisions most people make, and the financing side of it looks different from buying an existing house. Below are answers to the questions homeowners in the Wichita area ask most often when they're researching the process before they're ready to break ground.

How Custom Build Financing Works

Why can't I just get a regular mortgage to build a house?

A standard mortgage is based on the value of a house that already exists — the bank can see it, appraise it, and use it as collateral. When you're building, there's no finished home yet to secure the loan against (collateral), so lenders use a different structure built around a construction timeline instead of a purchase date.

What is a construction loan?

A construction loan is typically a short-term loan that covers the cost of building a home. Rather than handing you the full loan amount up front, the lender releases funds in stages as the work is completed, and payments on the loan sometimes don't start until six to 24 months after it's made. Construction loans also tend to carry higher interest rates than a standard purchase mortgage, since they carry more risk for the lender.

What happens when construction is finished — do I have a mortgage automatically?

It depends on the loan. Depending on the lender, a construction loan either has to be paid off in a lump sum once the home is complete, or it can convert into a standard long-term mortgage. If it doesn't convert automatically, you may need to apply for a new mortgage at that point — and your options will depend on the lender and your credit profile at the time, so it's worth comparing this detail across lenders before you commit to one.

What is a construction-to-permanent (single-close) loan?

This is a loan structure that combines the construction phase and the long-term mortgage into one loan with a single closing, instead of two separate loans and two closings. Because you're only closing once, you typically avoid paying closing costs twice — which can be a meaningful savings on a project this size.

How does the money actually get released during construction — do I get it all at once?

No. Construction loans are disbursed in a series of draws, tied to progress on the home rather than a single lump sum. A typical draw schedule follows the major phases of the build — for example, site work and foundation, framing, mechanical/electrical/plumbing rough-in, drywall and interior finishes, and final completion. Before each draw is released, the lender usually sends an inspector to confirm that phase is actually done. Robl Building Co. is familiar with this process and can help you understand what to expect at each stage.

Can the value of my land count toward my down payment or equity?

Often, yes. If you own your land outright — or have significant equity in it — many lenders will count that value toward the equity or down payment requirement on your construction loan, based on an appraisal of the land. This is one of the most overlooked advantages of building on land you already own, so it's worth asking any lender you talk to how they treat land equity specifically, since practices vary.

What credit score or down payment should I expect a lender to want?

This varies significantly by lender and loan program, so there's no single standard answer. Because construction loans carry more risk than a typical mortgage, many lenders do look for stronger credit and a larger down payment than you'd need to buy an existing home. Talking with a few lenders early — before you finalize your build budget — is the only reliable way to know what you'll actually qualify for.

Financing a Custom Build on Land You Already Own

If you already own the lot you plan to build on, you have a few additional paths worth knowing about, alongside the general construction loan options above.

Does owning my land change my financing options?

Yes, in a couple of ways. First, as noted above, your land equity may count toward your down payment. Second, it opens up loan programs that are specifically built around constructing a home — including on rural or acreage properties — that aren't relevant if you're purchasing a lot and building at the same time.

What is USDA Rural Development financing, and could it apply to land near Wichita?

For land in eligible rural areas, USDA Rural Development's Single-Close Construction-to-Permanent loan — part of its Section 502 Guaranteed Loan Program — is designed specifically for building a home on rural land. It's offered through a network of USDA-approved lenders and, for those who qualify, can finance up to 100% of the cost with no down payment required. Eligibility depends on both the property's location and household income, which cannot exceed 115% of the area's median income. Sedgwick County includes both USDA-eligible and non-eligible areas depending on proximity to Wichita, so the only way to know for certain is to check a specific address on USDA's eligibility map.

Are there financing options specifically for veterans building on their own land?

Yes. The VA offers a construction loan benefit that eligible veterans and service members can use to build a primary residence on land they already own or plan to purchase, often with no down payment and no private mortgage insurance. Fewer lenders offer this loan type compared to standard VA purchase loans, so it's worth confirming early whether a lender you're considering has experience with VA construction financing specifically.

Should I get my land evaluated before I start the financing process?

Yes — ideally before you're locked into a lot at all. Having an experienced custom home builder assess a property for things like drainage, flood zone status, utility access, and any area restrictions can save you from budget surprises well before you're sitting across from a lender. Issues like these can affect both your construction costs and, in some cases, your financing options, so it's worth doing this evaluation early rather than after you've already closed on the land.

Do you help connect clients with lenders who understand construction and rural financing?

Yes. Robl Building Co. works with clients throughout the Wichita area at every stage of financing a custom build, whether that means walking through how a construction loan works or evaluating a piece of land before you commit to it. We can help connect you with experienced lenders in the area.

Sources

This page is provided for general informational purposes and isn't financial or lending advice. Loan programs, eligibility, and requirements change over time and vary by lender. Talk with a mortgage professional about your specific situation.


Andy Robl