Building a Custom Home: Your Guide to the Process

Creating a custom home is exactly what it sounds like—fully personalized and designed to suit your lifestyle, taste, and needs. This level of customization makes it more costly than other types of new construction or existing homes, but it’s an investment in a home that’s truly yours. Today, custom homes are typically built on undeveloped land or on an empty lot in an established custom neighborhood. 

Because the cost to develop land is high, more production neighborhoods (think Pulte, Lennar, MI, Fischer Homes) are being developed, while new, custom neighborhoods are less common. If you’re ready to explore custom construction, here’s a guide to understanding each step along the way.

Financing Your Home

Financing for custom construction involves a unique loan called a Construction Loan, which is generally offered by local banks rather than traditional mortgage lenders. (Feel free to ask us for recommendations!) The very first step, even before you contact a builder or start looking for land, is to consult with a bank. This initial conversation will help you understand the specific requirements and structure of financing a custom build, such as:

  • Down Payment: Custom construction loans often require around 20% down, due before you break ground.

  • Draw Schedules & Carrying Costs: Ask the lender how funds are released during each stage of construction and what your carrying costs will look like.

  • Monthly Payments: Ask for an estimate for monthly payments based on your total budget.

  • Contingency Planning: Ask your lender if you’ll need to sell your current home before you build. If so, consider where you’ll live during construction! 

  • Budget Allocation: Decide how much of your budget can go toward land and how much should be reserved for construction costs. For example, if your total budget is $700,000 and you’re looking for 5+ acres, it’s very reasonable to spend at least $100,000+ on land alone, depending on location! 

Designing Your Home & Setting Your Budget

Since custom construction is all about your unique vision, accurate pricing is determined after you work with a builder to create floor plans. We know it seems a bit backwards, but we actually recommend starting this step before you search for land! Builders often charge a draft fee (usually ranging from $2,000–$10,000+) to collaborate with an architect on your custom plans. Once these plans are in place, the builder can provide a bid for your construction budget. Be sure to ask your builder if you own these plans, after they're completed!

Every builder’s process is a little different, but this drafting process usually includes selecting some interior and exterior finishes, so they have accurate information to base your budget on. This design process can be quite detailed and may take several months! It’s very easy to exceed budget limits here, so ask your builder and architect for guidance on keeping costs in check as you fine tune your plans! 

Note: Material costs, like lumber, fluctuate, so if you’re not ready to sign a contract immediately, be aware that prices may change by the time you move forward!

Interviewing Potential Builders

Building a custom home is a lengthy process (potentially 1–2+ years), so choosing the right builder is key! You’ll want to work with someone you like and trust. Here are some questions to ask potential builders, to help you find the best fit:

  • Who will be my main point of contact throughout the process?

  • Can I see examples of homes you’ve built? How many do you build per year?

  • How do you help clients stay on budget?

  • If I had land and were ready to start, how soon could we break ground?

  • How long does the entire process typically take, from our initial meeting to move-in day?

  • What warranties do you offer?

  • How do you handle any issues that arise during or after construction?

  • Do you have experience with projects similar to mine in size, style, or complexity?

  • How do you manage unforeseen expenses or budget changes?

  • Do you have an in-house architect or designer, or will I need to hire one separately?

  • What are the estimated costs for putting in a well and septic system, or connecting to city water and sewer?

  • How much will it cost to connect utilities?

  • Do you handle all permitting, or will some of this be my responsibility?

  • What finish level is included in the budget? (For example, chrome fixtures may be standard, but you might prefer something else. Or vinyl siding might be standard, but you may want brick.)

  • How do you assess land suitability, and will you handle necessary tests (such as soil or topography) to confirm the lot is buildable?

  • How do you manage quality control during construction?

  • Are you licensed, insured, and in good standing with local organizations like the Builders Association of Greater Indianapolis (BAGI)?

Once you have a clear construction budget, you’re ready to start your land search!

Purchasing Property

We love helping our clients buy property to build on! We’ll set you up on a search to be notified as soon as properties hit the market that match your criteria.

We’ll do some preliminary research on properties you’re interested in to see if there are any red flags and help you write an offer. After you have an accepted offer, there's a number of tests and things we’ll need to determine if a property is truly buildable.

  • Building Restrictions: Understand any limitations set by the city or county.

  • Septic and Well Placement: Identify where these can go and what kind is required, based on appropriate soil testing.

  • House Placement: Plan where the house will fit on the property to meet any guidelines.

Don’t worry - we’ll help you with all of this! Knowing the right questions to ask and contacts for each step—surveyors, county officials, and others—is key to a smooth process.

Closing on undeveloped property usually takes around 45 days, though it may take longer if surveys, plats, or county approvals are required.

We’re here to guide you through each step, from helping you understand site restrictions to coordinating with your builder on test fits. Once you’ve purchased your land, construction can begin whenever you and your builder are ready! 

Building a custom home is a journey, but having the right information upfront helps make the process smoother and more enjoyable. If you have any questions, feel free to reach out. We’re here to help bring your dream home to life!