If you are dreaming of owning land and building a custom home, the most important thing to understand early is how financing actually works. The simple answer is this: land and construction financing is very different from a normal home loan, and getting the order wrong is where most buyers run into trouble. I see this often with buyers looking at acreage in the Texas Hill Country around Dripping Springs, Blanco, and Fredericksburg.

Everything starts with the land. Some buyers pay cash, others finance the land separately, and many combine land and construction into one loan. None of these are wrong, but the structure matters. Talking to a lender before buying land helps you avoid purchasing a property that will not qualify later. Access, zoning, utilities, and septic approvals all affect whether a lender will touch the deal at all.

Construction loans work differently than standard mortgages. They are short term loans, usually twelve to eighteen months, with interest only payments while the home is being built. Funds are released in stages as work is completed, which means inspections, draw schedules, and timelines matter. Rates are typically higher during construction because the lender is taking on more risk, and once the home is finished, the loan converts to a permanent mortgage.

Financing is only one part of the equation. Managing the build matters just as much. Poor communication, missed inspections, or unrealistic budgets can delay a project and push costs higher fast. The buyers who have the smoothest builds are the ones who plan ahead, understand the process, and surround themselves with professionals who do this regularly.