Thinking about building a custom home near Cave Creek but unsure how to fund it from land to keys? You are not alone. The terrain here can be stunning and complex, which makes financing feel just as technical as the design. In this guide, you will learn the practical steps, lender expectations, draw mechanics, interest reserves, and contingency planning you need to move forward with confidence. Let’s dive in.
Choose your financing path
If you do not already own the lot, you can start with a land-only loan to purchase it. These loans often require higher down payments and shorter terms, which reflects the higher risk of vacant land. Lenders may ask for early proof of buildability, especially on hillside or septic lots, before they will fund.
To finance the build itself, most buyers choose between two structures:
- Construction-to-permanent (single-close): One closing, interest-only during construction, then it converts to a permanent mortgage at completion. This can lower total closing costs and offers rate certainty, which is helpful if rates are rising.
- Separate construction loan plus permanent mortgage (two-close): You close a short-term construction loan first, then shop and qualify again for the permanent mortgage at completion. This provides flexibility on the final mortgage, but usually increases total costs and requires a second closing.
Many custom buyers prefer single-close financing for convenience and rate protection. Local community banks and credit unions in Maricopa County often offer construction-to-perm products for custom builds, and experience with local hillside and septic conditions is a plus.
What lenders require
Construction lenders want a complete, well-documented package before they fund. Expect to provide:
- Borrower documents: income, assets, and credit.
- Lot details: deed, survey, property taxes, and HOA covenants if applicable.
- Construction package: full plans and specs, a detailed fixed-price contract with your licensed general contractor, a line-item budget, schedule, and contractor license and insurance.
- Site reports: geotechnical soils report for hillside conditions, and septic feasibility or perc testing when the property is not on sewer.
- Appraisal: an as-completed appraisal based on your plans and budget.
Lenders underwrite to the as-completed value. Typical ranges vary by lender, but construction-to-perm loans commonly finance about 75 to 80 percent of the completed value for conventional products, and lot loans often finance a lower percentage of the land value. Many lenders also require a cash down payment, earnest money, and a funded contingency.
How draws and interest reserves work
Your lender releases funds in draws that track construction milestones. Common stages include site work and foundation, framing, rough mechanicals, drywall and insulation, finishes, and final completion. Each draw usually requires an inspection and lien waivers, and lenders often hold a 5 to 10 percent retainage until punch-list items are done.
An interest reserve can simplify cash flow during the build. The lender sets aside part of the loan to cover interest that accrues on the outstanding balance as work progresses. Monthly interest is generally calculated as the outstanding balance times the construction rate, divided by 12. A larger reserve reduces out-of-pocket payments during construction, but it increases the financed amount that converts to your permanent mortgage.
Cave Creek site costs to plan for
The Cave Creek area includes foothills, rocky outcrops, and irregular lots with views. This beauty often brings specialized engineering and construction:
- Hillside work: soils investigations, engineered grading and drainage, retaining walls, and deeper foundations. Rock excavation and specialized equipment can add time and cost.
- Septic systems: many parcels rely on onsite wastewater. Early septic feasibility and design are critical. Some sites will need engineered systems that cost more and require more space.
- Permitting: complex grading, drainage plans, and septic approvals can add review time. Maricopa County reviews building permits, grading, and septic permits. Expect the schedule to reflect these steps.
Early feasibility helps keep surprises in check. Lenders are sensitive to permitting status and often want to see that major approvals are in hand or near completion before releasing significant funds.
Build a smart contingency
Custom homes benefit from a well-structured contingency. Consider the following:
- Baseline: 10 to 15 percent of hard costs for relatively straightforward sites.
- Hillside or septic lots: 15 to 25 percent is prudent until feasibility is confirmed.
- Separate buckets: keep a construction contingency for unknown site issues, a soft-cost contingency for permits and utilities, and an owner contingency for design upgrades.
- Access to funds: where possible, keep some contingency outside lender-controlled draws so you can move quickly on unforeseen items.
Common risks include rock or unsuitable soils, septic design changes, schedule slippage, interest-rate changes, and appraisal shortfalls. You can mitigate these with early studies, clear contracts, retainage provisions, and a conservative equity cushion.
Your financing timeline, start to keys
Here is a high-level map of milestones and what lenders typically review at each step:
Pre-purchase and feasibility
- Activities: soils and septic checks, preliminary grading review, conceptual budget, and lender prequalification.
- Lender focus: buildability, borrower strength, and early site constraints.
Lot purchase
- Activities: close on the lot and confirm title, survey, and taxes.
- Financing: land loan or combine lot acquisition into a single-close construction-to-perm if your lender allows.
Design and permit
- Activities: architectural plans, engineering, and permit submissions.
- Financing: many borrowers pay design and permit fees out of pocket, although some lenders allow soft-cost financing.
- Lender focus: completeness of plans, permit status, and inclusion of fees in the budget.
Site prep and foundation
- Activities: clearing, grading, septic installation or site work, and foundation.
- Financing: first construction draws release after inspections verify progress.
- Lender focus: geotechnical report, grading plan, and inspection reports.
Envelope and rough mechanicals
- Activities: framing, roof, windows, and rough plumbing, electrical, and HVAC.
- Financing: draws based on verified progress and lien releases.
Finishes and systems
- Activities: insulation, drywall, interior finishes, cabinets, and mechanical finish work.
- Financing: draws continue, with retainage held for final completion.
Final completion and conversion
- Activities: final inspections, punch list, and certificate of occupancy or final approval.
- Financing: final draw releases, then your loan converts to a permanent mortgage in a single-close structure, or you close a new permanent loan in a two-close structure.
Pro tips for Cave Creek buyers
- Start feasibility early with soils, septic, and preliminary drainage reviews before you finalize a lot purchase.
- Prequalify with lenders experienced in Maricopa County construction, and ask about hillside and septic projects.
- Secure a fixed-price contract with a reputable, licensed GC, with clear milestones, allowances, and retainage terms.
- Consider a single-close construction-to-perm loan if rate certainty and fewer closings matter to you.
- Plan for permitting time and align your interest reserve and schedule with realistic timelines.
- Maintain a separate cash contingency so you can respond quickly to site surprises or design upgrades.
Next steps
If you want a clear, lender-ready package and a budget aligned with the realities of Cave Creek terrain, start with feasibility and a detailed line-item build budget. Then choose the financing path that best fits your rate goals and cash flow. With the right plan, you can move from land to keys with fewer surprises and stronger control of your total cost.
Ready to map your custom-build financing near Cave Creek from start to finish? Reach out to Unknown Company for guidance tailored to your site, budget, and timeline.
FAQs
What is a construction-to-permanent loan for Cave Creek builds?
- A single-close loan funds construction with interest-only draws, then converts to a permanent mortgage at completion to reduce duplicate fees and offer rate certainty.
How do lot loans work near Cave Creek?
- Lot loans finance vacant land and often require 20 to 50 percent down, shorter terms, higher rates, and proof the site is buildable, especially for hillside or septic lots.
How large should my contingency be for a hillside or septic site?
- Plan for 15 to 25 percent of hard costs until feasibility is proven, while more straightforward sites may target 10 to 15 percent.
How are interest reserves calculated during construction?
- Lenders estimate total interest based on projected draws using monthly interest equal to outstanding balance times the construction rate, divided by 12, then set funds aside to cover it.
What is a typical draw schedule for a custom build?
- Draws often align with site work and foundation, framing, rough mechanicals, drywall and insulation, finishes, and final completion, each verified by inspections and lien waivers.
What inspections do lenders require before funding draws?
- Lenders usually order on-site or third-party inspections at each milestone to confirm completed work before releasing funds, and may hold a retainage until punch-list items are done.
When does my loan convert to a permanent mortgage?
- In a single-close structure, the construction loan converts after final inspections and approvals, while two-close financing requires a second closing at completion.
How long do Cave Creek permits take for hillside or septic builds?
- Timelines vary, simple permits can take weeks, but complex grading, drainage, and septic projects can take months, especially if plan revisions are required.
