Construction Loans

A construction loan finances building a home. With a one-time close loan, a single closing covers the lot, the construction, and the permanent mortgage, so you usually qualify once and close once. Funds are released to the builder in stages as the work is completed.

Justin Lazzaro, NMLS #1229453 | Reasy Financial, LLC, NMLS #2446155 | Licensed in Arizona, Pennsylvania, Florida, and Texas

Who a construction loan fits

Building takes more planning than buying. The loan works when the builder, the contract, and the budget are solid before closing.

Buyers with a licensed builder and a fixed-price contract

The lender approves the builder and the project along with you.

Buyers who want one closing

A one-time close usually avoids qualifying a second time. Some lenders recheck your credit at conversion, especially if the build runs long.

Who it usually does not fit

Owner-builders who plan to act as their own general contractor are generally not eligible for these programs.

How a construction loan works

1

You, the builder, and the plans are approved

The lender reviews your finances, the builder's credentials, the plans, the budget, and an appraisal of the finished home.

2

The builder is paid in draws

Funds are released in stages after inspections confirm each stage of work is complete.

3

The loan converts to a permanent mortgage

When the home is finished, the loan becomes a standard mortgage without a second closing.

One-time close construction loans are available in conventional, FHA, VA, and USDA versions through some lenders. I am a mortgage broker, not a government agency.

How it compares to other options

How you finance a new home depends on who is building it and when you take ownership.

How a one-time close construction loan compares to other ways to finance a new home
OptionHow it worksWorth knowing
One-time close construction loanOne loan covers the lot, the build, and the permanent mortgageYou usually qualify once, and the builder must be approved
Builder-financed new homeThe builder funds construction, and you get a standard mortgage at completionCommon in new subdivisions and simpler for the buyer
Renovation loanFinances the purchase and repair of an existing homeFor improving a home that already exists
Lot loan followed by a construction loanSeparate loans for the land and the buildMore closings and more cost

Three things to know before you apply

1

Delays and overruns are your risk too

Most programs require the build to finish within a set window. A contingency reserve in the budget is worth having.

2

Costs are higher than a standard purchase

Inspections, draw administration, and builder review add fees that a regular mortgage does not have.

3

The builder has to qualify

Licensing, insurance, experience, and financial strength are all reviewed. Not every builder will agree to the process.

Guidelines change. I confirm current requirements with the lender before quoting anything.

Common questions about construction loans

Short answers to common questions. Program rules vary by lender, so treat these as general guidance, not a loan decision.

Can I be my own general contractor?

Generally no. These programs require a licensed, approved builder.

Do I make payments during construction?

It depends on the program. Some require interest-only payments on the funds drawn so far, and in others the builder carries the interest.

Can I use land I already own?

Yes. Equity in the land can count toward your down payment.

When is the rate set?

On a one-time close loan the rate is set before construction begins. Some lenders allow an adjustment at conversion if rates have improved.

Can I build a manufactured or modular home?

Some programs allow it, with their own property and foundation requirements.

Where do you offer construction loans?

I am licensed in Arizona, Pennsylvania, Florida, and Texas. Availability depends on the lender and the builder, so I confirm it for your project.

Ready to talk it through?

Pick a time that works for you. We'll go over your goals and next steps, no pressure, just a conversation. Prefer to call or text instead? Reach me directly at (412) 638-4982, or book a quick Zoom if that's easier.