Financing a custom home build in Dallas-Fort Worth is fundamentally different from buying an existing home. You cannot get a standard mortgage on a home that does not exist yet. Construction lending is a specialized product with different requirements, rates, and processes - and understanding it before you start is critical to keeping your project moving.
Construction Loan Types Available in DFW
| Loan Type | How It Works | Best For |
|---|---|---|
| Construction-to-Permanent (C2P) | Single close: funds draws during build, automatically converts to 30yr mortgage at CO | Most DFW custom home buyers - one closing, one set of fees |
| Stand-alone construction loan | Short-term loan funds build; you refinance to permanent at CO | Buyers who want rate flexibility at conversion |
| Owner-builder loan | Borrower is their own GC; stricter requirements, lower LTV | Experienced builders only - most lenders avoid this |
| Lot + construction loan | Combines land purchase and build financing | Buying land and building simultaneously |
What DFW Construction Lenders Require
- →Signed contract with a licensed GC: Lenders want to see a complete scope of work, fixed price or cost-plus with cap, and evidence that your builder is licensed and insured.
- →Approved construction plans and permits: Some lenders require permits in hand before funding; others accept submitted plans. Know your lender's requirement before permitting.
- →Appraiser review: The lender orders an appraisal of the completed home based on plans and specs. The loan amount is based on this "future value" appraisal - typically 80-90% LTV.
- →Draw schedule: Lenders fund in draws tied to construction milestones - typically foundation, framing, MEP rough-in, drywall, and completion. Each draw requires an inspector sign-off.
- →Contingency reserve: Most lenders require 5-10% contingency funds in reserve or in the loan.
- →Credit and income: Similar to a standard mortgage - typically 700+ credit score, documented income supporting the permanent loan payment.
Construction Loan Rates and Costs in DFW
Construction loans in DFW carry higher rates than permanent mortgages - typically prime + 1-2% during the build phase. On a $500,000 project at 8.5% for a 12-month build, interest-only payments during construction run $3,500-$4,000/month. These payments are real costs that need to be budgeted alongside rent or an existing mortgage. At conversion to permanent, your rate locks to the market rate at that time.
Working With Your Builder on Financing
Your GC's draw schedule must align with your lender's draw schedule. Misalignment creates cash flow problems mid-project - the GC needs payment to pay subs, but the bank has not released funds yet. Zencore Homes coordinates draw schedules with your lender during pre-construction to ensure smooth funding throughout the project.
Zencore Homes works with construction lenders across DFW and helps buyers navigate financing from lot to certificate of occupancy.
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