Building a Custom Home as a Physician
Physicians who want to build a custom home face a more complex financing process than a standard purchase. A single-close construction loan may allow physician-specific guidelines to apply to the permanent mortgage, and land equity may satisfy some or all of the required equity contribution.
Matt Siket | Mortgage Loan Originator | NMLS #442558
How Physician Construction Financing Works
Single-close construction loans eliminate a second closing
A single-close construction loan combines the construction financing and the permanent mortgage into one closing, eliminating the need to re-qualify and close again when construction is complete.
Physician guidelines may apply to the permanent loan
Depending on the program and lender, physician-specific guidelines — including student loan treatment and down payment flexibility — may apply to the permanent loan portion of a single-close construction loan.
Land equity may satisfy some or all of the equity requirement
If you already own the land, the equity in that land may satisfy some or all of the required equity contribution, allowing you to build without an additional cash down payment in some cases.
From Builder Contract to Move-In
Builder contract and plans
A signed builder contract and approved construction plans are required before the construction loan process can begin.
Budget and contingency review
The construction budget, including contingency reserves, is reviewed to confirm the project is financeable within the program guidelines.
Construction phase
Funds are disbursed in draws as construction milestones are completed. The borrower typically pays interest only on disbursed funds during construction.
Inspections and draws
Each draw requires an inspection to confirm the work is complete before funds are released to the builder.
Construction completion
When construction is complete and the certificate of occupancy is issued, the loan converts to the permanent mortgage.
Permanent mortgage begins
With a single-close loan, the permanent mortgage begins automatically — no second closing, no re-qualification.
Already Own Your Land? Your Equity May Count
If you already own the land where you plan to build, the equity in that land may satisfy some or all of the required equity contribution for the construction loan. This means you may be able to build without an additional cash down payment in some cases.
- Land equity is calculated based on the appraised value of the land, not the purchase price
- The land must be owned free and clear, or the existing land loan must be paid off at closing
- The equity contribution requirement varies by program and lender
- A construction appraisal is required to establish the value of the completed project
- Already own your land? Your land equity may satisfy some or all of the required equity contribution
Let's Review Your Physician Construction Financing Options
Building a custom home as a physician requires planning that starts before the builder contract is signed. I help physicians review the construction loan structure, land equity, and permanent mortgage options before the process begins.