Building a home near Spokane can give you more control over the floor plan, location, and features than buying an existing house. It also introduces decisions that a standard home purchase does not: Is the parcel buildable? Can utilities reach the site? Who will build the home? How will the builder be paid as work progresses?
Financing works differently because the finished house does not exist yet. Your lender reviews the borrower, the land, the plans, the builder, and the estimated completed value. A clear financing plan before you buy a parcel can keep the land purchase from getting ahead of the project.
The Wells Group, powered by New American Funding, offers a One Time Close Construction program for eligible projects. This guide explains the questions to ask when considering land and a new home in the Spokane area.
What is a construction loan?
A construction loan provides financing for building or substantially rehabilitating a home. Unlike a standard purchase mortgage, funds are generally released as construction progresses rather than paid to a seller all at once. The Consumer Financial Protection Bureau explains that some construction loans are short term and later paid off with a separate mortgage, while others can convert to permanent financing.
With a construction-to-permanent structure, the construction phase and long-term home loan are connected. The Wells Group’s One Time Close program is designed to combine eligible land, construction, and permanent financing through one application and closing process. The actual terms, rate treatment, eligible property types, and closing structure depend on the program and your project. Ask for a written breakdown rather than assuming every construction loan works the same way.
Check the land before making a financing commitment
A parcel that looks ideal during a tour may have limitations that affect the home you can build or the cost to build it. Before you commit to buying land, involve the builder, lender, and the authority that handles permits for that address.
Start with the parcel’s legal access, zoning, setbacks, easements, utilities, and any conditions recorded against the property. Ask whether the planned home fits the site and whether extra work will be needed for grading, drainage, a driveway, or utility connections. The price of land is only part of the site budget.
Jurisdiction matters. An address in the City of Spokane may have a different permitting path from land in unincorporated Spokane County or another nearby city. Spokane County’s building and planning office administers permits and land-use rules within its service area; its permit page tells applicants to verify that the property is in that area first. Do not assume county guidance applies to every parcel with a Spokane mailing address.
For rural land, ask specific questions about a reliable water source and wastewater system. A private well or septic system may require evaluation, permits, installation costs, and lender documentation. Washington’s Department of Ecology provides a well report viewer, while the Department of Health explains septic systems. A nearby well report is useful background, but it does not guarantee water quantity or quality on your parcel. Have qualified local professionals review the site.
Build a budget for the entire project
The builder’s quoted home price may exclude meaningful expenses. Ask for a detailed budget that separates the land, site work, construction, financing, and move-in costs.
Items to discuss include:
- The land purchase or any balance owed on land you already own.
- Survey, design, engineering, soil or site studies, permits, and utility connection fees.
- Grading, driveway, foundation, well or septic work where applicable, and other site preparation.
- The builder contract, materials, labor, allowances, and change orders.
- Construction-period interest, insurance, inspections, and any fees for draws or modifications.
- The amount you must bring to closing and reserves for unexpected costs.
Some items can be financed if they meet program rules and fit the approved budget; others may require cash. Ask what happens if the site work costs more than anticipated or you choose upgrades after the plans are approved. Changes can affect the budget, appraisal, timing, and cash required.
The size of the long-term mortgage is only one affordability measure. During the build, you might also pay rent or carry an existing mortgage. Model how the overlap would affect your monthly cash flow if completion takes longer than planned.
Understand how the land and your equity are treated
You may be buying land and building immediately, or you may already own a parcel. Those situations are not identical. The lender will review the land’s title, existing liens, value, and the way the transaction is structured. If you bought the parcel earlier, ask whether and how your equity can count toward the project. If you are buying it now, ask whether the land purchase can be included in the construction loan and what deadlines apply.
Do this before closing on vacant land with a separate loan. That debt could affect your qualification, and the construction lender may have requirements about paying it off or subordinating it. A simple sketch of the financing plan can prevent you from being stuck with a parcel that is hard to use for the intended build.
Expect the builder and plans to be reviewed
Construction approval is about the project as well as the borrower. The lender may request a builder contract, plans and specifications, construction schedule, itemized budget, licenses or insurance, and information about the builder’s experience. The property may be appraised based on the proposed completed home and relevant comparable properties, subject to the applicable appraisal requirements.
Choose a builder who can provide the documents the lender requires and is comfortable with the draw process. Ask how the contract handles substitutions, delays, warranty obligations, and change orders. If you are considering a modular home, teardown, or a project that has already begun, raise it immediately. The Wells Group’s construction program page describes several potentially eligible property types, but eligibility for a specific project needs a direct review.
How do construction draws and payments work?
Rather than receiving the entire construction budget on day one, the builder typically requests funds at agreed milestones. The lender may verify progress and required paperwork before releasing a draw. This protects the financing structure, but it means the builder’s payment expectations must match the loan process.
Ask the mortgage team and builder:
- What is the draw schedule, and what must be completed for each release?
- Who orders inspections, and how long can a draw take?
- How are changes to the plans or budget approved?
- What happens if construction runs past the expected completion date?
- How is interest calculated during construction, and when do regular principal and interest payments begin?
The answers depend on your loan documents. Get them early enough to address any mismatch with the construction contract.
One closing versus separate construction and permanent loans
A single-close structure can simplify the financing steps by connecting construction and permanent financing. A separate construction-only loan may require a new application and closing for the permanent mortgage after the home is finished. Neither label tells you the total cost by itself.
Compare the initial cash required, closing costs, rate or lock provisions, construction-period payments, flexibility if the build changes, and requirements at conversion. If you already own the land or are considering a nonstandard project, ask the lender to walk through the actual sequence for that situation.
The CFPB notes that a construction loan may convert to a conventional mortgage, but a loan that does not automatically convert could require a new application. Read the specific loan documents to see what must happen at completion. A one-time-close product still has construction milestones and completion conditions to satisfy.
A sensible order of operations for a Spokane-area build
First, establish a preliminary budget. Discuss your income, assets, debts, desired payment, land plan, and anticipated build cost with a mortgage professional. The Wells Group’s loan program overview can help frame the financing conversation.
Second, evaluate potential parcels. Confirm the correct permitting jurisdiction, access, zoning, utilities, site conditions, and any recorded restrictions before removing purchase contingencies. Work with the appropriate local professionals on questions a lender cannot answer.
Third, develop plans and a builder budget. You need enough detail to assess costs, project eligibility, and the value of the proposed finished home. Discuss contingencies and what is excluded from the bid.
Fourth, complete the loan review. The lender evaluates you and the proposed project, orders any required valuation, and explains the closing, draw, and completion requirements. The Wells Group’s mortgage process page describes the general lending stages.
Finally, keep the team updated during construction. Delays and changes happen. Prompt communication about plans, costs, and timing can help identify what needs lender approval before work continues.
Frequently asked questions
Can I finance the land and construction together?
The Wells Group’s One Time Close program is designed for eligible projects involving land, construction, and permanent financing. Whether your particular parcel, builder, costs, and timeline qualify requires a review. Ask before signing a land contract or paying large nonrefundable deposits.
Do I need to own the land first?
Not necessarily. A program may allow an eligible land purchase to be part of the construction financing. If you already own land, the lender will evaluate its title, value, and any debt secured by it. The transaction structure matters.
What if I want to remodel an existing house instead?
A renovation loan may be more appropriate for certain existing-home projects. Explore the team’s renovation mortgage information and ask which product fits the scope of work. A major teardown or substantial rebuild needs a project-specific review.
Is the builder’s estimate enough to get approved?
Usually, the lender needs more than one headline price. Plans, specifications, a detailed contract and budget, builder information, site details, and a valuation may be part of the review. Request the current document list before committing to a builder timeline.
What happens if the project goes over budget?
It depends on the cause, loan terms, and how the change is handled. You may need additional funds or lender approval for changes. Include a realistic contingency in your planning and ask who is responsible for overruns under the builder contract.
Discuss the parcel and the financing together
The best time to explore a construction loan is before you commit to land or a builder contract. Led by Laura Wells, NMLS #330328, The Wells Group can review your proposed project and explain available financing paths. Contact the team to talk about building in the Spokane area, or visit 601 W Riverside Ave, Suite 750, Spokane, WA 99201.
Loan eligibility, rates, terms, and project requirements depend on the current program and individual review. Permitting and site information should be confirmed with the authority and professionals responsible for the property. This article is general information, not a commitment to lend.
