Building a custom home, funded by a Construction Loan, is often more rewarding than buying an existing property, as it allows you to realize the exact design you desire from the initial architect plans through land acquisition. The construction loan process involves several key steps, including the buyer securing plans and land, engaging a General Contractor, and the loan issuance being based on the Loan To Cost (LTC), which is the funding amount relative to the home's worth. Loans usually have a term of 6 to 12 months to cover the construction period, after which they typically transition to permanent financing via a one-time closing, saving the borrower the expense and hassle of a second qualification and set of closing costs. A favorable LTC, such as 80% on a $500,000 appraised home costing $400,000 to build, allows the borrower to potentially start with built-in equity.
