Dreaming of building a home in Heber Valley but unsure how to finance it? You’re not alone. Construction loans can feel complex, especially with local permits, utilities, and mountain weather in the mix. In this guide, you’ll learn how construction loans work here, the difference between one-time close and two-close loans, how draw schedules and inspections work, and the local factors that shape your timeline and budget. Let’s dive in.
Construction loan basics
One-time close vs two-close
A construction-to-permanent (one-time close) loan finances the build and then converts to your long-term mortgage when the home is finished. You close once, often lock a rate up front, and streamline underwriting. This is helpful if you want fewer moving parts and predictable costs.
A two-close approach uses a short-term construction loan first, then a separate closing for the permanent mortgage at completion. It can work well if you prefer product flexibility or your lender doesn’t offer a single-close option. The trade-off is potential rate or underwriting changes when you convert to the permanent loan.
Lot loans, construction loans, turnkey purchases
- Lot loan: Finances the land only. Lenders usually see land as higher risk, so expect higher rates, larger down payments, and shorter terms.
- Construction loan including the lot: You can finance the lot and the build within the construction loan. Your lender will require title evidence, surveys, and a detailed budget.
- Turnkey new construction: If you buy a completed home from a builder, you use a standard purchase mortgage. If you’re buying a home already under construction, you typically close when it’s complete.
Some buyers may qualify for programs like FHA or USDA one-time close options, depending on eligibility. Ask lenders to outline the pros, cons, and costs for each.
How draws and inspections work
Draw schedules
A draw schedule breaks the build into milestones like foundation, framing, mechanicals, exterior, interiors, and final completion. Your lender releases funds when each phase is done. Many lenders hold a small retainage, often around 5 to 10 percent, until the home is finished and the final inspection is complete.
Inspections and timing
For each draw, a lender-appointed inspector verifies progress. This is different from city or county inspections that your builder coordinates for code compliance. Once the lender’s inspection is complete, funds typically arrive within days to a couple of weeks, depending on the lender process.
Interest-only during the build
Most construction loans are interest-only during construction, and interest accrues only on the funds that have been disbursed. Depending on the loan, you may pay the interest monthly or roll it into the permanent loan when you convert.
Appraisal, documents, and down payment
Appraisal to future value
Your lender orders an appraisal based on plans, specs, and comparable completed homes to estimate the future value. For one-time close loans, the permanent mortgage is underwritten to that completed value. For two-close loans, you may need a new appraisal at the second closing.
Required documentation
Expect to provide a full construction contract, detailed plans and specifications, an itemized budget, lot deed and survey, builder license and insurance, permit details, and applicable reports like a soils or geotechnical report if required. Lenders also verify homeowners insurance and title policy details.
Down payment and reserves
Construction loans often require more equity than a resale mortgage. Many lenders look for 20 to 25 percent equity, which can include your lot if you already own it. Lenders also want to see a contingency in the budget, usually 5 to 10 percent, plus borrower reserves to handle overruns and interim expenses.
Heber Valley specifics that affect financing
Jurisdictions and permits
Heber City, Midway City, and Wasatch County each control land use, permits, and inspections for the properties within their boundaries. Permit review times and fees vary. Confirm your lot’s jurisdiction early so your lender and builder can budget and schedule accurately.
Utilities and connection fees
Some neighborhoods have municipal culinary water and sewer. Others, especially in rural areas, may rely on septic systems or private wells. Pressurized irrigation systems are common in many subdivisions. Your lender may require clear evidence that utilities are available and can be connected. Plan for tap and impact fees, which can add notable cost at permit or connection time.
Soils, slopes, and site engineering
Foothill and mountain-fringe lots can need geotechnical reports, engineered foundations, retaining walls, or rock excavation. Lenders may require these reports for underwriting. Site factors like slope, drainage, and frost-heave potential can lengthen timelines and raise costs, so address them up front in your budget and loan application.
Climate and build season
Heber Valley’s mountain climate brings snow and freeze-thaw cycles. Exterior work and utilities typically move faster from spring through fall. Winter building is possible, but it may slow progress or add cost. Many builders schedule sitework and foundations for late spring or summer and plan for weather contingencies.
HOA and design review
Many newer subdivisions have CC&Rs and design review boards. Getting architectural approvals can add time before permits are issued. Include this step in your pre-construction schedule and communicate the status to your lender.
Timelines and what to expect
Typical sequence
- Lot acquisition, site prep, permits: 1 to 4 months or more, depending on jurisdiction and subdivision requirements.
- Foundation and framing: 1 to 3 months.
- Mechanical, insulation, exterior finishes: 1 to 3 months.
- Interior finishes and finals: 1 to 3 months.
Custom homes in Heber Valley commonly take about 6 to 12 months from groundbreaking to move-in. Exact timing depends on lot conditions, weather, builder availability, and permit queues.
Common contingencies and how to manage risk
Contract and lender protections
- Financing and appraisal: Your ability to secure the loan and the projected value both matter. If the appraisal comes in low, you may need to add cash or adjust the plan.
- Builder performance: Contracts often include protections like performance bonds, escrow holdbacks, or completion guarantees.
- Cost overruns: Budgets usually include a 5 to 10 percent contingency. If costs exceed that, you are generally responsible for the difference.
- Permits and utilities: Include provisions for delays or changes in utility availability or connection timing.
- Final inspection and punch list: Lenders usually hold final funds until all inspections are passed and punch list items are complete.
Best practices
- Get a detailed construction schedule with milestone dates.
- Require a clear change order process and a written warranty.
- Keep an owner contingency fund, separate from the lender’s contingency.
- Confirm your builder is lender-approved and review references and warranty history.
- Verify permit fees, impact fees, and utility connection costs before you finalize the budget.
Building your team in Heber Valley
Lender, builder, and local brokerage
Interview at least two local lenders that actively fund construction loans in Wasatch County. Ask about one-time close vs two-close, rate lock options, draw processes, inspections, and required reserves. Choose a builder with proven experience in Heber Valley’s soils, slopes, utilities, and design review requirements, and confirm the lender approves them.
Work with a local brokerage that understands lot selection, HOAs, and jurisdictional differences. When your agent, builder, and lender collaborate early, you get a smoother path from lot to move-in.
How a vertically integrated partner helps
When your development, build, and sales team sit under one roof, you reduce handoffs and surprises. A single team can align plans and specs with lending requirements, coordinate draw documentation, manage design review submissions, and keep scheduling realistic around seasons and inspections. That clarity can save time and protect your budget.
Ready to map out a plan for your custom build or a lot-plus-build package in Heber Valley? Reach out to schedule a conversation with Zach Watts. You’ll get straight answers, a practical roadmap, and a proven local process.
FAQs
Can I roll my lot purchase into a construction loan?
- Often yes. Many lenders allow you to include the lot in a single-close loan or count your owned lot as equity to improve terms.
Who orders inspections for construction draws?
- The lender typically orders the draw inspection, while municipal code inspections are handled separately by your builder per the permit.
How much do lenders hold back at the final draw?
- A common retainage is about 5 to 10 percent until final completion and inspection, though exact amounts vary by lender and contract.
What if my project goes over budget during construction?
- You are generally responsible for overruns once the contingency is exhausted. Lenders expect a 5 to 10 percent contingency to help cover surprises.
Do I pay interest on the full loan during the build?
- No. Interest usually accrues only on funds that have been disbursed, and payments are typically interest-only until conversion.
Will my lender require a soils or geotechnical report?
- Many lenders require geotechnical reports for certain sites, especially where slopes, rock, or expansive soils are present.
Can I lock my mortgage rate during construction?
- With one-time close loans, the permanent rate is often locked at the initial closing. With two-close loans, you typically re-lock at the permanent closing and accept rate change risk.