Building a home from the ground up is exciting—but it starts with smart planning, especially when it comes to custom home financing. At Crystal Creek Builders, we guide our clients through the process step-by-step, including how to secure the right construction loan.
What Is Construction Financing?
Construction financing is a short-term loan used to cover the cost of building a custom home. Unlike a standard mortgage, a construction loan pays for the build itself—including land prep, permits, materials, and labor. Funds are released in phases based on completed work.
When the home is finished, this loan either converts to a standard mortgage or is paid off by the homeowner through a separate mortgage process.
Types of Construction Loans
There are two main types of construction loans to consider:
🔹 Construction-Only Loan
A short-term loan that covers just the build. Once the home is complete, the borrower must pay it off or refinance into a traditional mortgage. These loans can offer flexibility, but they require two separate closings and fees.
🔹 Construction-to-Permanent Loan
This all-in-one loan covers both the construction and long-term mortgage. Once construction is complete, it automatically converts into a standard home loan—no second closing required. This option is popular for its simplicity and cost savings.
Learn more from Consumer Financial Protection Bureau (CFPB) on how these loans work.
How Custom Home Financing Works in Prescott
Construction loans are disbursed in stages called “draws.” These funds are released to your builder as key milestones are completed—foundation, framing, drywall, etc.
You’ll usually pay interest-only during the construction phase. Once the home is finished, you’ll begin making full mortgage payments (if you chose a construction-to-permanent loan).
How to Qualify for Construction Loan Financing
Lenders typically require:
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Detailed Plans: Blueprints, scope of work, and a cost breakdown
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A Licensed Builder: Your builder must be licensed, insured, and reputable (like Crystal Creek Builders)
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Strong Credit: Higher credit scores are usually required than for traditional mortgages
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Down Payment: Typically 20–25% of the total cost
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Stable Income & Assets: You’ll need to show you can afford the payments and cover reserves
Our clients often ask, “Can you recommend lenders who specialize in this?” We can. We’ve worked with local lenders who understand the ins and outs of building in Prescott.
Why Many Clients Prefer Construction-to-Permanent Loans
For many of our homeowners, the convenience of a one-time close outweighs other options. Benefits include:
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✅ One loan, one set of fees, one closing
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✅ Ability to lock your mortgage rate before construction starts
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✅ Easier budgeting and fewer surprises
If you’re buying a lot + home package with us, this can be an especially efficient path. Learn more about how we structure home-lot package deals at Crystal Creek.
Planning Your Custom Home Financing Budget
Beyond the loan, you’ll want to plan for:
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Permitting & engineering fees
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Site work (clearing, grading, utilities)
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Soft costs like architectural design and selections
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Contingency reserves (5–10%) for changes or surprises
Our team makes custom home financing in Prescott clear and straightforward and we will walk you through what’s due at each step. We also make sure you understand allowances, builder draw schedules, and how your construction financing for a custom home ties to your build timeline.
Talk to an Expert First
Custom home financing is not like buying a resale home. It’s more complex—but manageable with the right team. We always recommend talking with:
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A lender who regularly funds new builds
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A financial advisor who understands your bigger picture
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A builder who can provide clear pricing models and a realistic timeline
At Crystal Creek Builders, we offer both Cost-Plus and Modified Fixed Price contracts so you can choose what fits your risk comfort and financing goals.
Ready to Take the Next Step?
If you’re considering building a custom home in Prescott, we’re here to help. From lot evaluation to design, construction, and financing conversations, we’ll guide you through it all.
Visit our 6-Step Process or contact us to schedule a consultation.
