Essential steps to avoid costly mistakes when financing a custom home on your lot in Texas.
Financing a custom home built on your lot in Texas is not the same as purchasing a pre-existing home—and misunderstanding the differences can cost you both money and peace of mind. On-your-lot loans are often construction-to-permanent loans that disperse funds in phases as milestones are achieved, with interest-only payments during construction. This structure leads to more points where precise budgeting and documentation are essential. Many buyers new to custom home building underestimate the scale and complexity of required documentation, the need for flexible cash flow during the build, and bank expectations about land value, builder vetting, and draw releases. For a full primer on construction loans and processes in Texas, see this guide.
New custom homebuilders often make preventable mistakes that increase project cost or delay move-in. The three most common: 1) Budgeting too tightly and not leaving room for contingencies, 2) Failing to map loan draw schedules to actual construction timing, and 3) Overlooking hidden costs such as land prep, permitting, and inspection fees. A tight or inaccurate budget can force compromises on finishes or features late in the game. Draw schedules must be clearly aligned between builder, client, and lender; missing a milestone can halt construction until the next draw is approved. Lastly, many fail to budget for "soft" costs—surveys, closing, temporary utilities, or holding costs on land.
Choosing a lender experienced with on-your-lot builds is just as important as hiring the right builder. Ask your builder for preferred local lending partners—they can recommend banks and credit unions familiar with Hill Country custom builds and who process draw requests quickly. Always compare multiple loan offers, paying attention to draw timelines, flexibility, and fees—not just initial rates. Strong communication between your builder and lender is critical—True Stone Custom Homes coordinates directly on documentation and inspection scheduling to streamline releases and avoid costly delays. For more on what to look for in a lending partner, see financing rural and custom home builds in Texas.
Email us at True Stone Custom Homes, LLC with any questions or assistance as we have worked with a wide range of lenders and situations when building on client's land.
Joseph@TrueStoneHomes.com