Planning & Guidance
Understanding construction financing helps you plan with confidence. Here is what to know before you begin.
Green Hammer Homes is not a financial institution and does not provide financial advice. The information on this page is for general guidance only. Please consult with a licensed mortgage professional for specific loan advice and current rates. Loan terms, interest rates, qualification requirements, and available programs vary by lender and are subject to change without notice.
The Basics
A construction loan is a short-term loan used to finance the building of a home. Unlike a traditional mortgage, funds are typically disbursed in stages (called "draws") as the construction progresses, rather than all at once.
During the construction phase, most lenders require interest-only payments on the amount that has been drawn. Once construction is complete, the loan is either converted to a permanent mortgage or paid off with a separate mortgage.
As your home is built, the lender releases funds at predetermined milestones. A typical draw schedule might include stages for foundation, framing, rough mechanicals, interior finishes, and final completion. Your lender will typically send an inspector to verify work is complete before releasing each draw.
Green Hammer Homes has experience working within the draw schedule framework of various lenders. Our detailed budgeting and milestone documentation align with common lender requirements.
Loan Types
A one-time close (or "single-close") construction loan converts automatically to a permanent mortgage when construction is complete. This approach means one set of closing costs, one approval process, and one interest rate lock.
A two-time close involves separate loans: a construction loan during the build, then a traditional mortgage once the home is complete. While this requires two closings, it offers the flexibility to shop for the best permanent mortgage rates after construction.
Smart Planning
Understanding what affects construction costs helps you set realistic expectations and plan effectively.
Lot price, topography, soil conditions, access to utilities, and setback requirements all influence your total project cost. Some lots require significant site preparation before construction can begin.
Square footage is the most obvious cost driver, but complexity matters too. Multi-story designs, complex rooflines, large window walls, and unique architectural features affect the cost per square foot.
The level of finish throughout the home can significantly influence the total budget. Countertop materials, cabinet quality, flooring type, tile selections, and fixture choices all contribute to the overall cost.
Higher insulation values, triple-pane windows, heat pump systems, and other energy-efficient features may increase upfront costs but can reduce long-term operating expenses significantly.
Permitting fees, impact fees, utility connection costs, septic systems (if applicable), well drilling, and site grading are often overlooked budget items that should be accounted for early in planning.
Industry practice recommends setting aside 5-10% of the construction budget for contingencies. Unforeseen site conditions, material price changes, or design modifications during the build are common.
Common Questions
Not necessarily. Many construction loans can include the cost of purchasing the land. If you already own the land, its value may count toward your down payment or equity position. Speak with your lender about how land ownership affects your specific loan structure.
Construction loans generally require a larger down payment than traditional mortgages, though specific requirements vary significantly by lender and program. Your lender will determine the required amount based on your financial profile, the project scope, and their program guidelines. We recommend contacting multiple lenders to compare requirements.
Design changes during construction (called "change orders") are possible but can affect both the budget and timeline. From a financing perspective, your lender approved a specific project budget, so significant changes may require lender approval. Green Hammer Homes documents all change orders clearly with associated cost and timeline impacts, making the approval process straightforward.
Build timelines vary based on the size and complexity of the home, site conditions, weather, permitting timelines, and material availability. A typical custom home in the Spokane area generally takes 8-14 months from groundbreaking to completion. Your construction loan term should account for the anticipated build timeline plus a reasonable buffer. Green Hammer Homes provides a detailed project schedule before construction begins.
While we do not provide financial advice or loan services, we regularly work with construction lenders and can provide the documentation they typically require: detailed project budgets, construction schedules, builder credentials, insurance certificates, and draw request documentation. Our experience with the construction loan process helps ensure the administrative side of your build runs smoothly.
Green Hammer Homes is not a financial institution and does not provide financial advice. The information on this page is for general guidance only. Please consult with a licensed mortgage professional for specific loan advice and current rates. Loan availability, terms, conditions, and qualification requirements are determined solely by the lending institution.
Schedule a free consultation to discuss your vision, budget expectations, and timeline. We will help you understand the full picture before you commit.
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