Financing the construction of one's dream home can be obtained in a variety of deal structures, but most loans are advanced on a "cost-to-complete" basis. This means the lending institution will agree to a total dollar amount of the loan before the construction begins, then release partial funds at certain stages (lock-up, drywall, completion, for example). Three or four separate advances are common. This means the lender will monitor the progress of construction and withhold funds corresponding to the uncompleted portions of the project. Therefore the borrower must have own funds necessary to complete the initial 30-35% of the project.

The cost of funds charged on the project loan is often a variable interest rate, but the rate can be fixed once the construction has been completed and the borrower converts the loan to a long term mortgage.

The maximum loan-to-value ratio depends on the borrower's income (ie. repayment ability) and credit history, but high ratio (ie. >80%), insured mortgages can be obtained if the applicant meets necessary application criteria.

If land purchase is required prior to construction, some lenders will allow land financing, usually up to 60-65% of value.