Building a house from the ground up is a dream for many — and for good reasons. You get to choose the floor plan, the finishes, the paint colors, and every detail that turns a house into your home. But what often catches future homeowners by surprise is the cost. Between the land, labor, materials, and everything in between, the expenses can add up fast.

That’s where a construction loan can step in to make things more manageable. Whether you’re just starting to plan or already working with a builder, understanding what goes into the cost of a new build — and how financing works — is key to turning your vision into a reality.

What Does It Really Cost to Build a Home?

The answer to this question depends on a lot of factors, like where you’re building, the size of the home, the materials you choose, and even the time of year. But let’s break down the major categories of cost so you can get a clearer picture of what to expect.

1. Land Acquisition

Before anything can be built, you’ll need to purchase a lot. This cost can vary dramatically based on:

  • Location (rural vs. city)
  • Lot size
  • Whether utilities like water, electricity, and sewer are already available
  • Zoning restrictions or building requirements

Don’t forget: You might also need a land survey, soil test, or environmental assessment, depending on your location.

2. Site Preparation

Once you’ve got the land, it needs to be ready for construction. This includes:

  • Clearing trees or brush
  • Leveling the land (also known as grading)
  • Excavation and foundation work
  • Running utilities (electricity, water, sewer, gas)

Some lots are “build-ready,” while others require significant prep — so factor that into your budget.

3. Design and Permitting

Hiring an architect or home designer to create your blueprints will cost money, and you’ll also need to secure permits before the building begins. These may include:

  • Building permits
  • Electrical and plumbing permits
  • Environmental or septic permits (if you’re building in a rural area)

Permit fees can range from a few hundred to a few thousand dollars.

4. Construction Costs

This is where the bulk of your budget will go. Construction costs include:

  • Labor and materials (framing, roofing, drywall, windows, flooring, etc.)
  • Contractor and subcontractor fees
  • Appliances and mechanical systems (HVAC, electrical, plumbing)

You’ll likely pay more for custom features or luxury materials, and prices can fluctuate depending on the market.

5. Interior Finishes and Landscaping

Once the structure is up, you’ll start making your house a home. These costs can include:

  • Cabinets, countertops, and lighting
  • Bathroom and kitchen fixtures
  • Paint, flooring, and trim
  • Landscaping, driveways, sidewalks, and fencing

These “finishing touches” can be where costs sneak up — especially if you decide to upgrade on the fly.

6. Contingency Fund

We always recommend setting aside a 10–20% buffer for unexpected expenses. Delays, price increases, and last-minute changes can (and often do) happen.
 

So, How Can a Construction Loan Help?

Now that we’ve covered the typical costs, let’s talk about how to finance your home build smartly — starting with a construction loan.

A construction loan is a short-term loan used to cover the costs of building a home. Unlike a traditional mortgage that provides a lump sum upfront, construction loans release funds in stages (also called “draws”) as each phase of the build is completed.

Here’s how construction loans can help ease the process:

1. Access to Funds When You Need Them

Instead of draining your savings or juggling multiple smaller loans, a construction loan allows you to:

  • Borrow what you need, when you need it
  • Pay contractors and suppliers on time
  • Stay on schedule without cash flow worries

2. Interest-Only Payments During Construction

While your home is being built, you’ll typically only make interest payments on the money you’ve used so far — not the entire loan amount.

3. One-Time Close Options

Many lenders offer construction-to-permanent loans, which convert into a traditional mortgage once construction is complete. That means:

  • One loan application
  • One set of closing costs
  • Less paperwork and hassle down the road
     

What Do You Need to Qualify for a Construction Loan?

Like any loan, construction loans come with requirements. You’ll want to be prepared with the following:

A Solid Credit Score

Most lenders prefer borrowers with good credit (typically 680 or higher). This helps secure better terms and interest rates.

A Detailed Construction Plan

You’ll need to provide:

  • A signed contract with your builder
  • A cost breakdown (budget)
  • Construction timeline and blueprints

The more detail, the better — it helps your lender better understand the scope of the project.

A Reputable Builder

Most banks require you to work with a licensed and insured contractor. This protects everyone involved and gives your lender peace of mind that the project will be completed as planned.

A Down Payment

Expect to put down around 20–25% of the total loan amount, depending on your financials and the project.
 

Transitioning to a Traditional Mortgage

Once your home is finished, your construction loan will either:

  • Convert into a permanent mortgage, or
  • Be paid off by a new mortgage (if you have a stand-alone construction loan)

Before this happens, you’ll need:

  • A certificate of occupancy from your local government
  • A final appraisal to confirm the home’s market value

After that, your loan terms will switch to a typical mortgage payment with interest and principal.

Why Build with Exchange Bank of Northeast Missouri by Your Side?

At EBNEMO, we’re more than just your lender, we’re your neighbor and partner in the home-building journey. When you choose to build with us by your side, you’ll benefit from:

  • Local expertise and personalized service from a bank that knows the area and understands the process
  • Construction loan options tailored to your budget, timeline, and long-term goals
  • Friendly, experienced loan officers who walk you through every step, from application to final inspection

We believe in making the home-building process as smooth and stress-free as possible. Whether you’re just dreaming or ready to break ground, we’re here to help make your vision a reality.

Ready to Start Building?

The idea of building your dream home may feel overwhelming at first — but with the right plan and the right financing, it’s entirely doable. A construction loan can help you manage the real costs of building while keeping your finances on track.

Let’s build something great together. Stop by your local Exchange Bank of Northeast Missouri branch or contact us online to speak with one of our lending experts. We’re happy to answer your questions and help you take the next step toward your new home.

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