Financing
One loan. One closing. Then the build.
A hybrid spec home is usually bought with a construction-to-permanent loan. It pays for the lot and the build, closes once before construction starts, and becomes a regular mortgage when the home is finished.
AI-generated illustration
Why this loan
It is what lets everyone be paid at the right time.
A standard mortgage needs a finished house. A construction-to-permanent loan is made against the lot, the plans and the builder’s contract, which is exactly what a hybrid spec home is on the day you choose it.
For the buyer
One closing
One application and one set of closing costs. You do not have to qualify a second time when the home is finished.
For the landowner
Paid before the build
The lot is bought at the loan closing. The landowner is paid then and has no stake in how construction goes.
For the builder
Paid as the work is done
The lender releases money in stages after each one is inspected. The builder does not finance the land or carry the build alone.
The sequence
The loan, step by step.
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Talk to a lender first
Before you pick a lot
Not every lender makes construction loans. Find one that does, and get pre-approved so you know your budget before you compare lots and plans.
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The lender reviews three things
You, the builder, the project
Your income, credit and savings. The builder’s license, insurance and track record. And the project itself: the lot, the plans, the specification and the signed construction contract.
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The home is appraised from the plans
Before closing
An appraiser values the home as it will be when finished, using the plans, the specification and recent sales nearby. A complete plan package helps.
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You close once
Lot bought, loan opened
At closing you buy the lot from the landowner and the construction loan opens. Your selections are already locked, so the builder can file for permits.
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The lender pays the builder in draws
During the build
After each stage is finished and inspected, the lender releases the next payment. During construction most loans ask you to pay interest only, and only on the amount drawn so far.
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The loan becomes your mortgage
At completion
After the final inspection and the certificate of occupancy, the loan converts to a regular mortgage with principal and interest payments. There is no second closing.
Before you choose a lender
What to ask.
Construction loans differ more from lender to lender than ordinary mortgages do. These questions surface the differences.
- Is it one closing or two? Some lenders make a construction loan and a separate mortgage, with two closings and two sets of costs.
- When is my rate set? At closing, or when the home is finished.
- What down payment do you need, and does it differ from your standard mortgage?
- How do you approve a builder, and how long does that take?
- What is the draw schedule, and who inspects before each payment?
- Do you require a contingency reserve in the budget for cost overruns?
- What happens if the build runs past the loan’s construction period?
- Do you offer a government-backed single-close loan? Some lenders do, and availability varies.
Questions
About the money.
Do I need to own the lot before I apply?
No. On the pilot’s default path the loan pays for the lot and the build together, and you buy the lot at the loan closing.
Do I make payments while the home is being built?
Usually interest only, and only on the money the lender has paid out so far. Your payment grows as the build progresses and becomes a regular mortgage payment after completion. Your lender sets the exact terms.
What if the appraisal comes in below the price?
Your contract says what happens. The usual choices are to put in more cash, renegotiate, or cancel under the contract’s terms. Ask about this before you sign.
Can I use my own lender?
Yes. Any lender that makes construction loans and approves the builder can be used.
Does anyone here get paid for referring me to a lender?
No. Neither Hybrid Spec Homes nor the brokerage is paid by a lender for an introduction.
Is Hybrid Spec Homes a lender?
No. Hybrid Spec Homes does not make, arrange or quote loans. This page describes how these loans generally work. Your lender’s written terms are the ones that apply.
General information only. This page is not lending, legal or tax advice and is not a commitment to lend. Loan programs, rates, down payments and requirements vary by lender and by borrower, and they change. Speak with a licensed lender about your own situation.
Start a conversation
Bring a lot, a plan, or a question.
Gold Peach Realty is the brokerage for the North Georgia pilot. Call or write and say whether you build, own land, want a home, or run a brokerage.