Buyers · Build Your Home
Construction Loans: Land + Home, Custom & Manufactured
Whether you're buying land and building, working with a custom builder or setting a new manufactured home on your acreage, the right loan structure makes the whole project easier.
How a construction loan works
A regular mortgage pays for a house that already exists. A construction loan pays your builder in stages ("draws") as work is completed and inspected. During the build you typically pay interest only on the money that has been drawn. When the home is finished, the loan becomes a regular long-term mortgage.
One-time close (construction-to-permanent)
One application, one approval and one closing before you break ground. The land, the build and your permanent mortgage are wrapped into a single loan, so you pay one set of closing costs.
Two-time close
A short-term construction loan first, then a separate mortgage when the house is done. It can be more flexible, but you qualify twice, pay two sets of closing costs and take the risk that rates change before the second closing.
Common one-time close programs
FHA One-Time Close
As little as 3.5% down. Many lenders look for a credit score around 620 or higher.
Primary residence only. Works for stick-built, modular and new manufactured homes (no single-wides).
VA One-Time Close
Eligible veterans with full entitlement may build with no down payment.
Fewer lenders offer it, so start your lender search early.
USDA Single Close
No down payment in USDA-eligible rural areas.
Household income must fall within program limits. Can be used for new stick-built, modular and manufactured homes.
Conventional
Usually 5% to 20% down depending on credit and lender.
A good fit for stronger credit, larger budgets or projects outside government guidelines.
Guidelines, loan limits and lender requirements change. A loan officer who regularly closes construction loans can tell you which program fits your project.
Land + Home
You found the land and want to build on it. With a one-time close, you can often buy the lot or acreage and finance the build in the same closing.
- Do land due diligence first. Access, survey, floodplain, deed restrictions, water, septic and electric all affect whether (and where) you can build and what it will cost. See Homesteading & Country Living for the full checklist.
- Budget for site work. Driveway, pad, well, septic, utility extensions and tree clearing can add up quickly on raw land.
- Already own the land? The loan is usually treated as a refinance, and your lender will explain how your land equity counts toward the project.
- Need to buy now and build later? A separate land loan may make sense. Land lenders typically ask for a larger down payment than home loans.
Custom Home
Building your own plan, your way. The lender is underwriting both you and your builder, so preparation matters.
- Vet the builder. Lenders review the builder's experience, insurance and financials. Most programs don't let you act as your own general contractor.
- Get complete plans and specs. The appraiser values the home "as completed" from your plans, specs and contract, so allowances and upgrades need to be spelled out.
- Build in a cushion. Change orders and price increases happen. Keep a contingency for things the loan won't cover.
- Understand the draw schedule. Know who requests draws, who inspects, and how long the build period is in your loan.
- Read the contract carefully. Warranty, completion date, delay terms and what happens if costs rise should all be in writing.
Manufactured Home
Today's manufactured homes can be financed much like a site-built home, as long as the home and the land meet the requirements.
- HUD Code home. It must be built on or after June 15, 1976, with the red HUD certification label on each section.
- Size. FHA and the conventional agencies require at least 400 square feet, and the conventional programs also require a width of at least 12 feet. Some programs and lenders want a multi-section home.
- Permanent foundation. The home has to be set on a permanent foundation that meets HUD/FHA guidelines, often confirmed by an engineer's certification.
- Titled as real property. In Texas, manufactured homes are personal property unless the owner elects real property status through TDHCA. You can only make that election if you own the land (or have a qualifying long-term lease), and it isn't complete until a certified copy of the Statement of Ownership is recorded in the county's real property records.
- Check deed restrictions. Many rural subdivisions limit or prohibit manufactured homes, or set a minimum size or age.
- Home only, no land? A home on leased land or in a community is usually financed with a personal-property (chattel) loan, which has different terms.
From land to move-in: the typical path
- Talk to a construction lender. Get pre-approved for the program that fits your project before you shop.
- Find the land. I help you search, write the offer and work through due diligence during the option period.
- Choose your builder and plans. Get a contract, plans, specs and a budget your lender will accept.
- Appraisal and approval. The appraiser values the finished home from your plans, and the lender finalizes the loan.
- Close and break ground. One closing for a one-time close loan, then construction begins.
- Build with draws and inspections. Your builder is paid in stages as work is completed.
- Move in and convert. The loan converts to your permanent mortgage. File your homestead exemption with the county appraisal district.
This page is general information, not lending advice. Loan programs, limits and guidelines change and vary by lender. Talk with a licensed loan officer about your situation.
Let's plan your build
Tell me about the land, the home and the timeline you have in mind. I'll help you find the right property and line up the people you need before you sign anything.
Call or text (512) 629-9050 Email Trina