One thing that came out of the conversation with both banks that I think is worth mentioning is how much down to put as part of the construction loan. Typically when you do a traditional mortgage, you’d try to do as much down payment as you are comfortable doing to get as close to 20% as you can because at 20% down, there is no PMI (private mortgage insurance). With a construction loan though, both banks recommended only doing the minimum of 10% down. Why you might ask? It’s all about the balance sheet and cash flow. During the year you’re building your home, you’re only paying interest on the amount drawn for the build of the home. When you finish, you’re likely selling your current house. When you apply the proceeds from the sale of your current home to the construction loan, you’ll (hopefully) easily cross over that 20% mark which means no PMI will ever be needed. And by only doing 10% down, you have more cash on hand for the inevitable surprises that come up during construction, or when you find that really awesome light fixture you just have to have.

Obviously, I am not a banker, nor a financial advisor, so you should talk with your financial planners, advisors, and lenders to see what works best in your situation. Also, it’s worth nothing that it might be totally different if you don’t own a house currently.