Frequently Asked Questions
Everything You're Wondering About Home Financing
33 answers, organized by topic. Can't find what you're looking for? Contact us.
About Custom Home Financing
What is Custom Home Financing, exactly?
It's an informational resource that helps you understand how home financing works — first-time purchase programs, HELOCs, refinancing, new-construction loans, jumbo loans, and land+build packages — and connects you with financing guidance suited to your situation.
Is customhomefinancing.com a lender?
No. We are not a lender and do not originate loans. We're an informational resource that helps you understand the financing landscape and helps connect you with licensed lenders and financing guidance.
Do you charge for financing guidance?
No — reaching out for guidance is free and doesn't obligate you to move forward with anything. It's a way to get oriented before you start contacting lenders directly.
Are you licensed to originate mortgages?
No. We do not hold a mortgage lending license and we don't originate loans ourselves. We help connect borrowers with licensed lenders who can originate and fund an actual loan.
Where are you located?
We're based in and serve Chandler, AZ and the surrounding area, though the financing guidance and educational content on this site is broadly useful wherever you're buying, building, or refinancing.
First-Time Homebuyer
What counts as a 'first-time homebuyer' for program purposes?
Definitions vary by program, but many first-time buyer programs define it more broadly than 'never owned a home' — for example, not having owned a home in the past three years can sometimes qualify. Ask a lender how a specific program defines it.
Do I need 20% down to buy my first home?
No — that's a common misconception. Many loan programs allow significantly less than 20% down, and some low-down-payment and down-payment-assistance programs exist specifically for first-time buyers. Ask a lender what you may qualify for.
What's the difference between pre-qualification and pre-approval?
Pre-qualification is a quick, informal estimate based on information you provide. Pre-approval involves a lender actually verifying your income, assets, and credit, and typically carries more weight with sellers when you make an offer.
Can I use gift funds for my down payment?
Many loan programs allow gift funds from family members toward a down payment, usually with documentation requirements to verify the funds are a genuine gift and not a loan. Confirm the specific rules with your lender and loan program.
HELOC
What is a HELOC?
A home equity line of credit (HELOC) is a revolving line of credit secured by the equity in your home, similar in structure to a credit card but generally with a lower rate since it's secured by real estate.
How is a HELOC different from a home equity loan?
A home equity loan is a lump-sum loan with a fixed rate and set repayment schedule. A HELOC is a revolving line you can draw from as needed during a draw period, generally with a variable rate.
How much can I typically borrow with a HELOC?
It depends on your home's value, how much equity you have, and the lender's guidelines, but many lenders look at your combined loan-to-value ratio when determining a HELOC limit. A lender can give you a specific number based on your situation.
What's the draw period vs. the repayment period?
The draw period is the window (often 5-10 years) when you can borrow against the line, often making interest-only payments. Once the draw period ends, you enter the repayment period, where you pay back principal and interest on whatever balance remains.
What do people typically use a HELOC for?
Common uses include home renovations, debt consolidation, education costs, or covering a major unplanned expense — essentially any situation where borrowing against home equity makes more sense than other financing options.
Refinancing
What's the difference between a rate-and-term refinance and a cash-out refinance?
A rate-and-term refinance replaces your existing mortgage with a new one, typically to get a better rate or different term, without changing the loan balance beyond closing costs. A cash-out refinance replaces your mortgage with a larger loan and gives you the difference in cash.
When does refinancing typically make sense?
Common scenarios include securing a meaningfully lower interest rate, shortening your loan term, removing mortgage insurance, or tapping equity for a specific need. Whether it makes sense for you depends on your break-even timeline versus closing costs.
How do I know if refinancing is worth the closing costs?
A basic way to think about it: divide your closing costs by your monthly savings to estimate your break-even point in months. If you plan to stay in the home well past that point, refinancing is more likely to pay off.
Does my credit score affect my refinance rate?
Yes — refinancing generally involves similar underwriting to a purchase loan, and your credit score, debt-to-income ratio, and home equity all factor into the rate and terms you're offered.
New Construction
How is a construction loan different from a regular mortgage?
A standard mortgage funds a home that already exists and can be appraised as-is. A construction loan funds a home that doesn't exist yet, releasing money in stages (draws) as the build progresses rather than as one lump sum.
What's the difference between a one-time-close and a two-close construction loan?
A one-time-close (construction-to-permanent) loan combines the construction loan and the permanent mortgage into a single closing. A two-close loan closes the construction loan first, then requires a second closing to refinance into permanent financing once the build is done.
What is a draw schedule?
A draw schedule is the plan for releasing construction funds in stages as work is completed, rather than as one lump sum upfront — typically tied to inspections confirming each phase is actually done.
Can I finance land and construction together?
Many construction loan programs allow financing land and construction as a single package if you're purchasing land and building at the same time. If you already own the land, its equity can often be applied toward your build instead.
How long does a typical new-construction loan process take?
It varies widely based on land status, permitting, builder availability, and loan type — anywhere from several months to over a year from pre-qualification through move-in is common. A lender or builder can give you a realistic timeline for your project.
Jumbo Loans
What makes a loan 'jumbo' instead of 'conforming'?
A jumbo loan is one that exceeds the conforming loan limit set for your county, which means it can't be purchased by Fannie Mae or Freddie Mac. Because of that added risk, jumbo loans typically carry somewhat different qualifying standards.
Do jumbo loans require a bigger down payment?
Often, yes — down payment expectations on jumbo loans commonly run higher than on conforming loans, though the exact requirement varies by lender and your overall financial profile.
Is it harder to qualify for a jumbo loan?
Generally, yes — lenders often look for stronger credit, lower debt-to-income ratios, and larger cash reserves on jumbo loans compared to conforming loans, since there's no government-sponsored enterprise backing to offset the lender's risk.
Credit & Pre-Approval
What credit score do I need to get pre-approved?
Minimum credit score requirements vary by loan program and lender — there's no single number that applies everywhere. It's worth getting a direct answer from a lender based on your full financial picture rather than assuming a threshold.
Does debt-to-income ratio matter as much as credit score?
Yes — lenders look at your existing debt relative to your income in addition to your credit score, since it affects your ability to comfortably cover a new mortgage payment.
What if my credit score isn't strong enough right now?
Paying down revolving debt, correcting errors on your credit report, and waiting to apply until your score improves are all common steps. A lender or credit counselor can give you a specific plan based on your report.
What documents will a lender ask for during pre-approval?
Typically recent pay stubs or income documentation, tax returns, bank statements, and a summary of your existing debts. Requirements vary by lender and loan program.
Working With Us
Do you offer loans directly?
No — we don't originate loans or hold a mortgage lending license. We're an informational resource that helps you understand the financing landscape and connects you with financing guidance and licensed lenders suited to your situation.
How do I get started?
Call 844-967-5247 or fill out our short financing application intake form, and we'll help point you toward next steps based on where you're at — whether you're just researching or ready to talk to a lender this month.
Why did Contractors Choice Agency build this site?
Contractors Choice Agency works with contractors and trade businesses, including many involved in new-home construction. We saw how often buyers went into the financing process confused and built this as a plain-English resource to help.
Still have questions?
Call 844-967-5247, email josh@contractorschoiceagency.com, or fill out a short form and we'll follow up within 1 business day.