Minnesota Home Building FAQs

Although many new-construction loan products are available, we generally simplify the financing options into two primary categories: 

• Client Financing 
• Builder Financing

It is also important to understand the difference between a construction loan and an end loan: 

• A Construction Loan finances the lot and home while construction is taking place. 

• An End Loan is the buyer's permanent mortgage on the completed home, similar to the mortgage used to purchase an existing home. 

Neither Client Financing nor Builder Financing is automatically right or wrong. The best structure depends on the buyer's lot ownership, available equity, current home, cash flow, qualifications, and desired timeline. 

Client construction financing is when the buyer works directly with a lender to obtain a construction loan that funds the home during construction. 

Once the home is complete, the construction loan will typically either:

• Convert or recast into the buyer's permanent mortgage or
• Be refinanced and paid off with a traditional end loan

The exact process depends on whether the lender offers a one-time-close or two-time-close construction loan.

Client end-loan financing is when the buyer obtains a traditional permanent mortgage after the home has been completed. 

This is typically when:

• Price Homes carries the construction financing
• The buyer purchases a completed model or spec home
• The buyer purchases a home that is already under construction
• The buyer closes only after the home is substantially complete 

An end loan is similar to the mortgage used when purchasing an existing home. It does not fund the construction process itself. 

In most situations, yes. 

Client construction financing is typically the most cost-effective options because the buyer obtains the construction loan directly and avoids adding the builder's separate financing costs to the project. 

The buyer is generally responsible for:

• Construction-loan fees
• Title and closing costs
• Construction interest
• Appraisal costs
• Inspection or draw fees
• Permanent mortgage costs, depending on the loan structure

Even with these expenses, client construction financing is less costly than having the builder obtain and carry a separate construction loan. 

With builder financing, the builder's construction-loan costs are added to the project price, and the buyer must still obtain an end loan at completion. This can effectively create financing, title and closing expenses for two separate loans used to complete one build. 

The typical process is:

1. The buyer obtains approval for a construction loan
2. The lender review the buyer lot, plans, specifications, builder, construction contract and project budget
3. The construction loan closes before construction begins
4. The lender releases funds to Price Homes through construction draws 
5. The buyer generally pays interest based on the amount drawn during construction
6. Once the home is complete, the loan converts to permanent financing or is paid off with a traditional end loan

Client construction financing is often the best fit when the buyer:

• Can qualify for and carry the construction loan
• Already owns the lot
• Has meaningful equity in the lot
• Does not need to sell an existing home before beginning construction
• Can manage the payments or interest during construction
• Wants to minimize the overall financing cost
• Is comfortable taking ownership and financing responsibility during construction

Often, yes.

If the buyer already owns the lot, the lender may allow the equity in the land to count toward the required down payment or equity contribution.

For example:

• Lot value: $50,000
• Existing lot loan: $0 
• Available lot equity: $50,000
• Required project contribution: $50,000

In this example, the equity may satisfy some or all of the lender's required contribution. 

The lender will generally confirm the lot value through and appraisal and title review. 

The available lot equity is generally appraised lot value minus the outstanding loan balance. 

For example:

• Appraised lot value: $100,000
• Existing lot loan: $40,000
• Estimated lot equity: $60,000

The construction lender may be able to pay off the existing lot loan at the construction-loan closing and apply the remaining equity toward the buyer's required contribution.

Not necessarily. 

A construction lender can often incorporate the existing lot loan into the new construction financing. 

The lender will review:

• Current lot value
• Existing payoff amount
• Available equity
• Total construction cost
• Completed appraised value
• Required loan-to-value ratio

Builder financing is when Price Homes obtains and carries the construction loan during the build. 

The buyer typically waits until the home is complete to obtain a permanent mortgage and close on the completed home. 

This can be helpful when the buyer does not want to, or cannot, carry a construction loan while also owning an existing home. 

The typical structure is: 

1. The buyer and Price Homes agree on the lot, home, plans, specifications, and project price. 
2. The buyer receives approval for the anticipated permanent mortgage. 
3. The buyer signs a purchase agreement or other applicable contract. 
4. The buyer provides the required deposit or equity contribution, which is typically between 10% and 20% of the total project cost, although requirements may vary. 
5. Price Homes obtains the construction financing. 
6. Price Homes carries the construction loan, interest and construction obligations throughout the build. 
7. The costs associated with the builder's construction loan are added to the total project cost
8. The buyer obtains a traditional permanent mortgage when the home is complete. 
9. The buyer closes on the completed home and lot. 

The estimated cost of builder financing is commonly approximately 3% to 4% of the total project cost, although the actual amount depends on interest rates, construction time, lender terms, draw fees, closing costs and other project-specific factors. 

Generally yes. 

When Price Homes obtains and carries the construction loan, the costs associated with that financing are added to the overall project cost. 

Those costs may include:

• Construction-loan origination fees
• Lender fees
• Appraisal fees
• Title expenses
• Construction-loan closing costs
• Draw fees
• Inspection fees
• Interest during construction
• Other lender-required charges

The buyer then obtains a separate permanent mortgage at completion. As a result, there can be a duplication of financing, title, and closing expenses. For buyers who can comfortably obtain and carry their own construction loan, Client Construction Financing is typically the more economical option. 

Builder Financing can solve a timing, qualification or cash-flow challenge. 

For example, a buyer may have an existing home to sell and may not:

• Qualify for both the current mortgage and construction loan
• Want to carry two housing obligations
• Want to begin construction before selling
• Have enough available cash to manage construction financing
• Want to take on construction-loan administration

In those situations, the additional cost may be worthwhile because Builder Financing allows the buyer to delay the permanent mortgage and final closing until the new home is complete. 

Yes. Price Homes generally requires a deposit or equity contribution before obtaining and carrying the construction loan. 

The required amount is typically between 10% and 20% of the total project cost, although certain situations may require more or less.

The deposit is based on:

• Total project price
• Lot value
• Level of customization
• Buyer-specific upgrades
• Builder financing exposure
• Home-sale contingency
• Amount required by the construction lender
• Risk if the buyer is unable to close

The exact deposit is established for each individual transaction.

Potentially, yes. 

If the buyer already owns the lot, the land value may be used as part or all of the required deposit or equity contribution. 

This depends on:

• Appraised value
• Existing lot debt
• Available lot equity
• Price Homes requirements
• Construction-lender requirements
• Title condition
• Overall project economics

Possibly. 

If Price Homes obtains the construction loan, the lender may require Price Homes to own the lot securing that loan. 

This could require the buyer to quitclaim or otherwise transfer the lot to Price Homes before the construction financing closes. 

The applicable agreements should clearly address:

• The lot transfer
• Existing lot debt
• Buyer equity
• Credit towards the purchase price
• What happens if construction does not proceed
• What happens if the buyer cannot close
• How ownership transfers back to the buyer at final closing

This is not required in every Builder Financing transaction, but it may be required by the construction lender. 

A quitclaim deed is a legal document that transfers a person's ownership interest in real estate to another party. 

In a Builder Financing structure, the buyer may be asked to quitclaim the lot to Price Homes so Price Homes can use the property as collateral for the construction loan. 

The buyer should review this arrangement with the title company, lender and their legal advisor before transferring ownership.

Generally no. 

Because Price Homes is carrying the construction financing, the buyer does not typically make payments on the new home during construction. 

The buyer's permanent mortgage normally begins after the home is complete and the final closing occurs. 

Price Homes pays the construction-loan interest and carrying expenses as they become due. 

However, these expenses are incorporated into the overall project cost paid by the buyer.

An end loan is the buyer's permanent mortgage on the completed home. It is similar to the mortgage used to purchase an existing home. 

With Builder Financing, the end loan is used at the final closing to:

• Pay Price Homes the remaining purchase price
• Transfer ownership of the completed home and lot to the buyer
• Establish the buyer's permanent mortgage

A completed model or spec home is typically purchased with a normal end loan, similar to purchasing an existing home. 

The buyer generally:

1. Obtains mortgage pre-approval 

2. Signs the purchase agreement
3. Completes the appraisal and underwriting process
4. Conducts the applicable inspection and final walkthrough
5. Closes on the completed home

The buyer generally does not need a construction loan because Price Homes has already financed and completed the construction.

The buyer can usually sign a purchase agreement while Price Homes completes the home. 

Price Homes continues carrying the construction costs, and the buyer prepares the permanent end-loan financing. 

The buyer typically closes after:

• Construction is substantially complete
• The certificate of occupancy or other applicable approval is issued
• The appraisal is complete
• The lender's remaining conditions are satisfied
• The final walkthrough is complete

The buyer generally has two potential financing options on a price homes-owned lot. 

Option 1: Builder Financing 

Price Homes retains ownership of the lot, obtain s the construction loan and carries the financing during construction. 

The buyer typically:

• Gets pre-approved for the future end loan
• Selects the lot, plan, and specifications
• Signs a purchase agreement 
• Provides earnest money and the required deposit
• Allows Price Homes to finance and build the home
• Obtains and end loan and closes when the home is complete

The buyer takes ownership of the lot and home at the final closing. 

Option 2: Client Construction Financing

The buyer may also purchase the lot and obtain a construction loan covering both the lot purchase and the home construction. 

In this structure:

• The buyer purchases the lot before construction
• The buyer's construction lender finances the lot and build
• the lender releases construction funds through draws
• The buyer pays the construction-loan expenses and interest 
• The construction loan converts to permanent financing or is paid off with an end loan

This option can prevent the duplication of builder construction-loan costs and buyer end-loan costs. It is often more economical for buyers who can qualify for and comfortably carry the construction loan. 

Client Construction Financing is typically the most economical structure when the buyer already owns the lot. 

The buyer obtains a construction loan using the lot and future home as collateral. The buyer's available lot equity may count toward the lender's required contribution. 

Builder Financing may also be considered when the buyer needs additional flexibility, but it may require:

• A deposit or equity contribution
• Transfer of the lot to Price Homes
• Additional title and closing work
• Construction-financing costs added to the project
• A separate permanent mortgage closing at completion

A one-time-close loan combines the construction loan and permanent mortgage into one transaction. 

The buyer closes before construction begins. During the build, the lender releases funds through draws. When construction is complete, the loan converts or recasts into permanent financing. 

Potential advantages include:

• One closing
• Fewer duplicated closing costs
• Financing arranged before construction begins
• Possible interest-rate protection

The exact terms and conversion process vary by lender.

A two-time-close construction loan involves:

1. A construction-loan closing before the build
2. A separate permanent mortgage closing after completion

The permanent mortgage pays off the construction loan. 

This structure can provide flexibility but may involve:

• Two sets of closing costs
• A second appraisal
• New underwriting
• Additional title expenses
• Interest-rate risk before completion

A two-time-close loan may allow the buyer to lock the permanent rate later if rate are not favorable when construction begins. However, waiting also creates the risk that rates could increase before the home is complete.

Permit fees are determined by each city, township and county. Every jurisdiction has different fee structures and requirements.

We submit complete applications as quickly as possible and communicate regularly with reviewing agencies, but approval timelines are ultimately controlled by the governing jurisdiction.

Most permit are approved in approximately 4 weeks from the date they are submitted. Depending on the city, county, and complexity of the project, approval can be as quick as 2 weeks or 8 weeks or longer.

As a general guideline, permit costs for a home built on acreage are often around $6,500, while permits for homes within many cities may average approximately $18,500. Actual permit costs vary depending on the jurisdiction, home size, and specific project requirements. 

No. Construction cannot legally begin until all required permits have been issued by the governing jurisdiction. Beginning work before permits are approved can result in stop-work orders, additional costs, fines, and project delays. Our team coordinates the permitting process to help ensure construction begins only after all required approvals have been received. 

Np. Price Homes coordinates the permitting process on your behalf and work with the appropriate agencies throughout construction. 

Usually no. Most city lots connect to municipal water.

In most rural areas, yes.

Licensed contractors specializing in well drilling and septic installation complete this work while we coordinate the overall construction schedule.

Yes. We can often review a property and help identify water and sewer costs for your lot and a lot that you are looking at buying for your next home.

Neither is universally better. City water and sewer offer convenience and lower maintenance, while private wells and septic systems provide independence and ore often the only option on beautiful rural properties. The best choice depends on your goals, location, and the type of property you want to build.