Building or buying new? Let’s make sure the builder’s contract works for you — not just for them.
Schedule a New Construction Consultation- A custom home runs on a construction loan, not a standard mortgage — short-term money released in stages as the house goes up.
- You’ll choose between a construction-to-permanent loan that rolls into your mortgage automatically and a stand-alone loan you refinance yourself later.
- Plan for a bigger down payment than a resale purchase — construction loans commonly ask for roughly 20–30% of build cost, plus a strong credit file.
- Start the money conversation before you break ground, and work with a lender who writes construction loans in the Triangle every week.
Building your own house in the City of Oaks is one of the most personal purchases you’ll ever make. The financing is where most people trip — because a custom build doesn’t work like buying a finished house off the market. In my 17+ years across the Raleigh-Durham Triangle, I’ve watched the money side make or break a project before the first stake goes in the ground.
Here’s how the loans actually work, what lenders look for, and who I point clients to when they’re ready to build.
How Custom Home Financing Works
When you buy a completed home, you get a traditional mortgage in one lump sum. A custom build is different. You need a construction loan — short-term money that covers the cost of building, released to your builder in stages as the work progresses. When the house is finished, that construction loan converts or refinances into a permanent mortgage.
A construction loan pays your builder in stages, not all at once — and how it becomes your mortgage is the choice that shapes everything else.
The Two Loan Structures
There are two roads to the same finished house. A construction-to-permanent loan converts to a permanent mortgage automatically once the build is complete — one loan, one closing. A stand-alone construction loan covers the build only; you obtain a separate permanent mortgage afterward. Which one fits depends on your timeline, your rate outlook, and how much closing paperwork you want to sign twice.
| Financing option | How it works | Best for |
|---|---|---|
| Construction-to-permanent loan | Funds the build in stages, then converts to a permanent mortgage automatically when the home is complete — one loan, one closing. | Buyers who want a single loan and a single closing from ground-break to move-in. |
| Stand-alone construction loan | Covers construction costs only; you secure a separate permanent mortgage after the home is finished. | Buyers who want to shop the permanent mortgage separately once the house is built. |
What Lenders Look At
A construction loan asks more of you than a resale mortgage. The lender is betting on a house that doesn’t exist yet, so they underwrite you and the plan harder. Three things carry the most weight.
You, the borrower
- Credit and history: lenders typically want a higher credit score and steadier financial history than they’d require for a traditional mortgage.
- Down payment: expect a larger one than a resale purchase — commonly around 20–30% of total construction cost.
The project
- Detailed plan and budget: the lender wants to see exactly what you’re building and what it costs.
- Realistic timeline: a credible completion schedule they can fund against, stage by stage.
Finding the Right Lender in the Triangle
Not every bank writes construction loans, and the ones that do aren’t all equal. Work with a lender who specializes in construction financing and has real experience with custom home builders in your area. Compare rates, terms, and requirements before you commit — confirm current rates directly with each lender, since they move.
A few local names I see doing this work well across Raleigh-Durham:
- North State Bank — construction-to-permanent loans with competitive rates and a quick application.
- Towne Bank Mortgage — custom home financing with a range of loan options and personal service.
- Pinnacle Financial Partners — construction loans with flexible terms and experienced loan officers.
Local Resources Worth Tapping
Beyond the lender, the Triangle has support built for people who build. Some local governments offer incentives or tax breaks for energy-efficient or sustainable construction. And industry groups — the Home Builders Association of Raleigh-Wake County and the Durham/Orange/Chatham Home Builders Association — open doors to contacts and resources you won’t find on your own.
Building or buying new? Let’s make sure the builder’s contract works for you — not just for them.
Schedule a New Construction ConsultationGetting the Money in Place
The financing process has a rhythm. Follow it in order and the disbursements flow to your builder without a hitch.
- Protect your credit. Pull your credit report, fix errors, and address issues before you apply — a strong score earns better terms.
- Gather your paperwork. Proof of income, tax returns, and a detailed construction plan and budget. Work with your builder and lender so the application is as strong as it can be.
- Build a contingency fund. Custom builds surprise you. Budget for unexpected costs and delays, and keep communication open through construction.
- Close the loan. Sign the legal documents, pay any required fees, and the lender starts releasing funds to your builder in stages as the work gets done.
- Lean on your team. A reputable builder, a financial advisor, and a mortgage broker who’ve done this before keep the whole process from wobbling.
Start early and stay in close contact with your lender. Regular updates on your progress and any changes to your plans keep the money moving and head off delays before they cost you.
Frequently Asked Questions
Building or buying new? Let’s make sure the builder’s contract works for you — not just for them.
Schedule a New Construction Consultation
