Land and Construction Financing Mistakes That Can Blow Up Your Budget

One wrong step in land and construction financing can cost you tens of thousands because the loan stack is different than a normal home purchase. You can have a land loan, a construction loan, and then permanent financing, and each one has its own down payment rules, timelines, and approval traps. If you buy land first with no plan, you can end up owning dirt you cannot build on, or stuck with expensive financing you did not anticipate.

In Central Texas and the Texas Hill Country, the smartest sequence is usually lender first, then land, then builder. Land loans are riskier for banks, so expect higher down payments, shorter terms, and higher rates, especially if the tract has no utilities or road access. If you already own the land, the equity can sometimes count toward your construction down payment, but you have to get that confirmed upfront in writing.

The most common mistakes I see are choosing a lender who makes draws slow, underestimating permitting timelines, and ignoring site prep costs and contingencies. In places like the City of Austin, permits can take many months. Out in Hays County, Blanco County, or Gillespie County, it can move faster, but you still have septic, well, and utility realities. Budgeting a real contingency matters because finish out changes always happen once you see the house take shape.

If you want to avoid the expensive missteps before you buy land, I can help you map the lender, builder, and timeline sequence and connect you with the right local pros. Start at https://chrispesek.com, email chris@drippingspringshometeam.com, or call 512-736-1703. Chris Pesek is a Texas Hill Country Realtor specializing in land, acreage, and custom homes. 383+ sales. Top 2 Percent Producer. 63 five-star reviews. Dripping Springs, Austin, Wimberley, Fredericksburg, Blanco, Johnson City, Hays County, Blanco County, Gillespie County