When building your home, you will most likely need a construction loan. This type of loan gives you money, as payments are due on the construction of your home. You will need to make interest payments based on the amount you have currently borrowed. The lender pays your builder as needed to complete various stages of the building process.

Sometimes the loan amount is not enough to cover the entire building process. Ask your lender how cost overruns will be handled if the home's cost exceeds the initial building contract. In most cases you will need to refinance the loan and pay additional fees for refinancing. To avoid this potential problem it is a good idea to borrow more than the estimated amount.

Some people like to have their builder handle the financing of the construction loan. For the builder to do this they most often will need to own the land that the home is being built on. If you currently own the lot, you will need to sign a deed over to the builder in order for them to handle the financing.

When figuring out your budget to build the home it is important to figure in your interest rates. You will be paying interest on your home while it is being built.