Planning a new build in Billings’ West End? The right financing can make or break your timeline and budget. Between city permits, inspections, and the draw process, a loan that fits your project rhythm will keep cash flowing when your builder needs it. In this guide, you’ll learn how to choose between single-close and two-close loans, weigh builder-preferred lenders against outside options, and set up rate locks, draws, and inspections that align with local milestones. Let’s dive in.
Start with your project timeline
Your financing should follow your build, not the other way around. In Billings, the City’s plan review and inspection calendar can shift your start date and each draw milestone. Check current permit review times and inspection scheduling with the City of Billings Development Services so your first draw and follow-up draws aren’t delayed by processing windows.
Site prep can also add time and cost. Lots near the Yellowstone River may have floodplain considerations, so review your parcel on the FEMA Map Service Center. Confirm utility availability and hookup timing with Billings Public Works. Build some slack into your schedule so the lender’s rate lock and draw timing can absorb weather or subcontractor delays.
Choose your financing structure
Two popular options for West End single-family builds are construction-to-permanent and two-close construction loans. Your choice affects rate certainty, closing costs, and how easily your lender coordinates draws with your builder.
Construction-to-permanent (single-close)
A single-close loan funds construction and converts to your permanent mortgage at completion.
Pros:
- One closing and often one set of closing costs
- Potential to lock your permanent rate at or near closing
- No second appraisal or closing in many cases
Cons:
- Less ability to shop your permanent terms later
- Some lenders price a premium to bundle both phases
Best fit if you want early rate certainty and a streamlined path from final inspection to move-in.
Two-close construction loan
You close an interim, interest-only construction loan first, then refinance to a separate permanent mortgage after completion.
Pros:
- Flexibility to shop permanent terms once the home is done
- Potential advantage if you expect rates to fall during the build
Cons:
- Two closings and duplicative closing costs
- Exposure to higher permanent rates if the market rises
Best fit if you want to shop widely later or believe rates may trend lower by completion.
Decide on your lender: preferred vs outside
Builders often recommend a preferred lender for speed and coordination. That convenience can be valuable, but you should compare total costs and terms.
Builder-preferred lenders
Pros:
- Familiar with the builder’s draw schedule and inspection process
- Faster documentation flow and coordinated milestone checks
- Possible incentives such as closing cost credits or upgrades
Cons:
- Incentives may be offset by higher rates or fees
- Any affiliated relationships should be disclosed per applicable rules
Ask for a written estimate that lists rate, points, fees, draw inspection charges, retainage policy, and any incentive conditions. For a neutral primer on mortgage shopping, review the Consumer Financial Protection Bureau.
Outside lenders
Pros:
- Ability to shop rates and terms across banks, credit unions, and mortgage programs
- Potentially better permanent terms for the same profile
Cons:
- May need extra coordination to match the builder’s draw and inspection cadence
If you choose an outside lender, establish a single point of contact for draw coordination and get the draw verification requirements in writing before you sign your construction contract.
Lock your rate with a plan
Rate locks work differently in construction lending. With single-close loans, you may lock upfront or lock at conversion. Some lenders offer forward locks or a one-time float-down if rates fall. Extensions can be costly if construction runs long.
Ask each lender for written details on:
- Lock length and when it begins
- Extension fees and what events trigger them
- Any float-down option and its cost
If rate certainty matters most, favor a program that allows locking at or near closing with clear extension terms. If you expect rates to decline, a two-close approach may let you shop later, but budget for a second set of closing costs.
Align draws, inspections, and retainage
Draws should match work you and your builder can verify. Many West End builds follow milestones like lot acquisition, foundation, framing, rough mechanicals, exterior shell, interiors, and final completion.
What to expect:
- Inspections before disbursement, sometimes with photos, invoices, and lien waivers
- Third-party or lender construction officer inspections
- Retainage, often 5 to 10 percent, held until final completion
Request in writing:
- The proposed draw schedule tied to measurable milestones
- Who inspects and how quickly funds release after approval
- The retainage policy and lien waiver requirements at each stage
Appraisal, LTC, and LTV
Appraisals for new construction often rely on the cost approach, plus sales comparison with recently built homes. If the appraisal is below contract price, your lender will limit the loan amount, and you may need a larger down payment or a price adjustment.
During construction, many lenders size to loan-to-cost. At conversion, they look at loan-to-value. Ask how your lender handles both tests and what happens if costs or values shift during the build.
Insurance, title, and lien protections
Plan for the protections lenders expect during construction:
- Builder’s risk insurance that covers the total insurable value and the lender’s interest
- General liability and worker’s compensation carried by the builder or general contractor consistent with Montana requirements
- Clear title on the lot, plus lien waiver procedures to minimize mechanic’s lien risk
Confirm which inspections or certificates your lender needs before releasing final funds or converting to permanent financing. Municipal signoffs and a certificate of occupancy often come into play near the end.
Cost comparison checklist
Compare apples to apples across lenders and loan structures. Add up your total cost over the build and into the permanent loan.
Key items to compare:
- Interest rate, points, and origination fees
- Underwriting, draw inspection, and wire fees
- Commitment or conversion fees, plus lock extension or float-down costs
- Interim interest during construction
- Permanent rate and payment, including the effect of any builder credits
- Duplicative closing costs for two-close structures
For additional program context, you can review resources from HUD, the U.S. Department of Veterans Affairs, Fannie Mae, and Freddie Mac.
A West End build timeline
Every build is unique, but this general flow can help you plan financing around municipal and construction milestones.
- Pre-construction: prequalification, builder contract, lot purchase if separate. Expect 2 to 6 weeks.
- Permitting and site prep: plan review, permits, and utilities. This can take a few weeks to a few months, depending on project complexity and City workload.
- Foundation to framing: 4 to 10 weeks, weather and subcontractor schedules can stretch this.
- Rough mechanicals to exterior finish: 6 to 12 weeks.
- Interior finishes to final: 4 to 8 weeks.
- Conversion or second close: 1 to 2 weeks for single-close conversion after final inspections. Allow extra time for appraisal and a separate closing with a two-close loan.
Build in buffer time for City inspections and any material delays. To track permit timing and inspections, visit the City of Billings Development Services.
Your pre-build checklist
Before you sign a construction contract, get your financing playbook in order.
- Compare at least two lenders, including the preferred option and one independent. Ask each for interim interest estimates, draw procedures, inspection fees, retainage policy, and conversion or second-close costs.
- Request disclosures about any affiliated relationships or incentives. If applicable, review the terms in writing.
- Ask your builder for a proposed draw schedule tied to clear milestones, and confirm how each lender will verify progress.
- Confirm permit responsibilities, submission timeline, and likely approval windows.
- Verify insurance coverage, clear title, and a lien waiver plan at every draw.
- Reserve a 5 to 10 percent construction contingency and hold extra cash for rate or closing variability.
- Clarify which inspections or certificates your lender requires for the final draw or conversion.
Communication that keeps cash flowing
Strong coordination prevents delays.
- Assign a single point of contact at your lender and builder for draw requests.
- Get the inspector’s name or company and the lender’s typical funding timeline after approval.
- Set a shared calendar for permit milestones, inspections, and targeted draws.
When to consider each option
Consider a single-close loan if you want rate certainty, fewer moving parts, and faster conversion once you have occupancy. A two-close loan can be smart if you expect rates to drop or want to shop permanent terms later, and you are comfortable with a second closing.
If your builder’s preferred lender offers meaningful incentives and tight draw coordination, weigh that convenience against the total cost and rate. If you go with an outside lender, formalize the draw process early so inspections and disbursements match your builder’s workflow.
Local resources to bookmark
- City of Billings Development Services: permit applications, plan review procedures, and inspections
- FEMA Map Service Center: parcel-level flood zone lookup
- Consumer Financial Protection Bureau: mortgage shopping guides and tools
- Montana Housing: state program information and resources
Building in neighborhoods across the West End, including areas like Rimrock West and Silver Creek Estates, requires a financing plan that moves in step with your permits, draws, and inspections. When your loan terms, rate strategy, and draw mechanics are tuned to your timeline, you can keep the project on schedule and reduce cost surprises.
If you want a local, boutique team to help you compare options, coordinate with your builder, and keep your West End build moving, connect with the Brosovich Real Estate Team. If you plan to sell your current home to fund your new construction, request a free home valuation to map out your equity and timing.
FAQs
Do I have to use the builder’s preferred lender in Billings?
- Usually no. A preferred lender can streamline underwriting and draws, but you can compare outside lenders for better rates or terms. Ask for written incentives and disclosures to compare true cost.
What is the difference between single-close and two-close construction loans?
- Single-close combines construction and permanent financing in one closing for rate certainty and fewer steps. Two-close separates the interim construction loan and later permanent mortgage for more flexibility but adds a second closing.
How do draw inspections work during a West End build?
- Lenders verify progress at each milestone through inspectors, invoices, photos, and lien waivers. Ask how quickly funds are released after approval so your builder can stay on schedule.
What if the appraisal comes in below my build contract price?
- Your lender will cap the loan based on the appraisal. You may need to increase your down payment or renegotiate with the builder. Plan a contingency for this risk.
How do rate locks and float-downs work for construction loans?
- You may lock at closing, lock for a future conversion, or add a float-down option for a one-time reduction if rates fall. Get lock length, extension costs, and float-down terms in writing.
What protections help prevent subcontractor liens?
- Retainage and lien waivers at each draw reduce risk. Require clear lien waiver procedures and final releases before the last disbursement or conversion.
