Thinking about breaking ground on a custom home in West Meadows but not sure how to finance the journey from dirt to dream home? You are not alone. Between large-lot logistics, design approvals, and mountain weather, the process has a lot of moving parts. This guide explains how construction-to-permanent loans work in Mountain Village, what lenders expect, and how to plan your budget and timeline with confidence. Let’s dive in.
Construction-to-perm basics
One loan, one closing
A construction-to-permanent loan combines your construction financing and long-term mortgage into one loan and one closing. During the build, you typically make interest-only payments on funds that have been drawn. When the home is complete, the loan converts to your permanent mortgage without a second closing, which helps you avoid duplicate fees and re-qualification risk. Money’s overview of construction loans outlines these core mechanics.
Draws, inspections, and interest
Lenders release funds in stages tied to milestones like foundation, framing, and finishes, and they verify progress with inspections and invoices before each draw. Many programs use an interest reserve or require monthly interest-only payments during construction. Bank filings show interest reserves are a common feature in construction lending and are reviewed during underwriting. See Bank of America’s public filing for examples of interest reserve treatment in construction lending contexts: institutional disclosure.
Rate locks and float-downs
Your permanent rate may be set at closing, allowed to float down later, or priced at conversion, depending on the lender. Confirm if there is a float-down option, when it applies, and what it costs before you sign. Money’s guide explains common approaches to rate locks and conversions.
Why this loan fits West Meadows builds
West Meadows sits on Turkey Creek Mesa near Mountain Village with very large parcels, protected view corridors, and design controls. Projects here typically move through the Town of Mountain Village’s Community Development process and the Design Review Board. You can review meeting schedules and submittal guidance on the Town’s Design Review Board page.
Construction season at roughly 9,500 feet is short, so having one closing and a clear draw schedule reduces risk during weather delays. Wildfire-safe materials also matter to insurers and lenders. Mountain Village offers a cedar shake roof replacement incentive and defensible-space programs that can support insurability on finished homes.
What lenders look for in Mountain Village
- Appraisal on plans and specs. Lenders order an “as completed” appraisal based on your architectural plans, specifications, and timetable. Larger projects can require two appraisals. Money’s overview covers this process.
- LTV and LTC limits. Many banks cap loan-to-value on the completed home at about 70 to 80 percent and also test loan-to-cost. Your equity, including lot equity, must satisfy the stricter of the two. See Investopedia’s explanation of LTC.
- Reserves and documentation. Expect full income and asset documentation, builder vetting, a line-item budget, and contingency funds. Bank program guides show lenders often want healthy reserves and a clear draw schedule. See this bank’s process overview for typical requirements: construction loan process.
- Interest and contingency reserves. Many lenders require interest reserves and a 5 to 10 percent construction contingency, and they will verify that you can cover overruns. See the Bank of America filing on reserve practices: institutional disclosure.
- Insurance and wildfire readiness. Insurers and lenders favor fire-rated roofing and defensible space. Mountain Village’s incentive program can help support post-construction insurability.
Budget and schedule realities in Mountain Village
National surveys put average construction cost around $162 per finished square foot, but luxury mountain builds trend much higher due to site work, logistics, and finishes. In Telluride-area markets, custom budgets often land several hundred dollars per square foot and can exceed that depending on the site and design. For a national baseline, see NAHB data summarized here: cost of building a new home.
Construction terms for single-family projects commonly run 12 to 18 months, with 6 to 12 draws and the option to extend if needed. Winter limits exterior work, so plan for a 9 to 18 plus month build depending on complexity. See typical timelines in this lender summary: construction timeline basics.
Surprise costs to plan for in West Meadows:
- Rock excavation, long driveway and utility runs, and winter access.
- Specialized foundations, high-elevation insulation, and snow-load roof systems.
- Septic and well, or municipal connection fees and trenching if applicable.
- Materials freight, erosion control, and landscaping on large sites.
Your financing roadmap for West Meadows
Secure the lot and gather records. Document your land purchase and any existing liens. Lot equity can count toward your total project equity.
Build your team early. Hire a licensed, insured general contractor with recent local mountain experience and get a fixed-price or guaranteed-maximum contract with a clear draw schedule.
Advance design and approvals. Complete architectural plans and specs, and start Town submittals with the Design Review Board to confirm building envelope, materials, and scheduling.
Assemble a complete budget. Include a realistic contingency, interest reserve if required, and line items for site work, utilities, and winter conditions.
Choose the right lender. Confirm LTV and LTC caps, reserve requirements, rate lock or float-down options, draw inspection fees, and whether a second appraisal is needed.
Set up insurance. Obtain builder’s risk during construction and confirm post-completion insurability, including wildfire considerations.
Break ground and manage draws. Expect inspections and dual approvals before funds are released. Keep invoices and change orders organized to avoid delays.
Convert to permanent. On completion and certificate of occupancy, the loan converts to your long-term mortgage per your original terms.
Questions to ask your lender and builder
Lender
- Will my permanent rate be locked at closing or at conversion? Is a float-down available and what does it cost?
- What are your LTV and LTC limits for this loan size? How do you count lot equity?
- How many draws do you allow, what inspections are required, and what are the fees?
- Do you require one or two appraisals for this amount?
- How many months of reserves do you require and how is the interest reserve handled?
Builder
- Are you licensed and insured locally and can you share recent references for similar high-elevation builds?
- Is your contract fixed-price or GMP, and does it include a clear draw schedule and lien waiver process?
- How do you plan around winter, snow loads, and long lead materials?
- Who manages permits, DRB coordination, and inspection scheduling?
Common pitfalls and how to avoid them
- Under-budgeted site work. Rock, access, and utilities can add six figures. Build a strong contingency and verify subs’ bids.
- Overlooking schedule risk. Weather and approvals take time. Align your loan term and draw schedule with a realistic timeline.
- Weak contract protections. Require lien waivers, clear payment terms, and verified insurance from your builder and major subs.
- Rate risk surprises. If rates might fall, ask about float-down options. If they might rise, consider locking earlier.
- Insurability issues. Choose fire-rated roofing and plan defensible space early to support insurance and lender comfort.
Ready to build in West Meadows?
If West Meadows is where you want to put down roots, a well-structured construction-to-perm loan can streamline the path from plans to keys. With the right lender, builder, and approvals, you can protect your budget and timeline while building a home that fits the landscape. If you would like local guidance on lots, approvals, and market values, connect with Matthew Hintermeister for a discreet, high-touch conversation about your plan.
FAQs
What is a construction-to-perm loan for a Mountain Village custom home?
- It is a single loan that funds construction with interest-only draws, then converts to a long-term mortgage at completion without a second closing, as outlined in Money’s overview.
How much down payment do West Meadows builds typically require?
- Many lenders cap loans at about 70 to 80 percent of completed value and also test loan-to-cost, so your equity must meet the stricter test, per Investopedia’s LTC guidance.
How are builder draws paid on a West Meadows project?
- Lenders release funds in stages after inspections and invoices, and many require both borrower and lender approval before each draw, per Money’s guide.
Can my West Meadows lot equity count toward the loan?
- Yes, lenders often credit lot equity toward your required project equity if LTV and LTC tests are satisfied. See a typical lender process summary here: construction loan process.
How long should I plan for design, permits, and building at 9,500 feet?
- Many custom builds run 9 to 18 plus months, with construction loans commonly set for 12 to 18 months and extendable, per this timeline overview.
