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NMLS #373538

How to start a New Construction Loan

Financing your new custom built home is a two-step process. First, you obtain a temporary new construction loan to get the project started. After the construction is complete, you modify your initial loan  at the best terms available.

Taking the first step

  • Meet with one of our Lending Hand Mortgage officers to get PreQualified for the amount you can afford.
  • Make a wish list, including features and locations.
  • Go and see new home communities and builders in your selected price range. Use an experienced real estate agent to guide you.

Contact one of our Florida Mortgage Offices

Learn more about how you could qualify for a Florida New Home Construction loan.


What Is a Construction Loan?

A construction loan is typically a short-term loan used to pay for the cost of building a new home.


Construction Loan Requirements

  • Borrower’s Ability to Repay Loan
  • Credit Score
  • Cash Reserve
  • Value of Home
  • Budget for Loan Amount


More information about New Home Construction Mortgage.


How to Get a Loan to Build a House

You will need strong credit and a minimum down payment of 10% at closing. The exact down payment requirement is determined by the cost of the land and the planned construction. If you already own the land, you can use it as equity for your construction loan. Lending Hand Mortgage will check the credit and credentials of your builder as well.

Consider the following when you apply for a Construction Loan

  • Buying Within a Development
  • Buying a Custom-Built Home
  • Strong Credit Requirements

Not all New Construction Loans are created equal. Lending Hand Mortgage will present you the best loan which fits your needs.

Contact us today to get PreQualified for a New Construction Loan.

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Key Points of Construction Loans


Borrower’s Ability to Repay Loan

There are many factors that a lender will look at when considering an application for a construction loan. One of the first is the ability of the borrower to repay the loan.

During the construction phase, money is disbursed “as you go”  what are called “draws”.  These draws are based on the stage of construction completed at certain intervals. You are charged interest based on the amount drawn. Additionally, the borrower is required to set aside a certain amount of money called an interest reserve. The monthly payments are made from this amount until the project is completed based on the amount drawn.


Credit Score and Cash Reserve Requirements

Also, considered will be Credit score and cash reserves. The credit score requirements will vary depending on the amount of the loan. The higher the loan amount requested, the higher the credit score will need to be.


Value of Home

Construction loans are made on a project that has not yet been completed. Therefore, the lender bases much of the loan qualification criteria on the value of the finished product. An appraisal will determine the value of the home once it is completed.  The appraisal will determine the Loan-to-Value percentage.  The lower the Loan-to-Value percentage, the less risk exists for the lender, so loan terms may be more favorable.


Budget for Loan Amount

The loan amount will be based on a budget provided by the borrower.  The budget is detailing all costs of the building project, including planning fees, permit fees, construction costs and any fees connected with the loan. This budget should be thoroughly completed because there will be no money provided above the loan amount, even if costs are more than the original budget.

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Closing a Construction Loan

There are two types of construction loans,  they may go by different names depending on the lenders offering them. To make it easy we’ll call them a “Single Close” and a “Two Step” loan.

Single Close Construction Loan

The single close construction loan is a program that finances the purchase of the lot and construction costs of your home. It serves as the long-term financing as well.

Two-Step Construction Loan Closing

A “Two Step” loan differs from a “Single Close” loan in that the home buyer will close on one loan that is solely used to finance the purchase of the lot and the construction of the home. Once the home is fully completed, the homeowner refinances the construction loan with a permanent conventional loan of their choosing.

The two loans do have some similarities:

  • Most lenders will require at least a 10% down payment (very few will go less than 10% down and will require very compelling compensating factors to do so)
  • The equity position will be based on the LESSER of the cost of acquisition or finished appraised value
  • The borrower typically makes interest-only payments only on the portion of funds used during construction
  • The borrower/builder will take draws as needed to cover materials and labor completed
  • The borrower AND builder will need to be fully approved by the construction lender

Find the right Lending Hand loan officer near you to assist you with all your lending needs.

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Why a Lending Hand Mortgage professional?

Lending Hand Mortgage (NMLS #373538) prides itself on providing unparalleled customer service and earning satisfied clients. Our purpose? Satisfy the mortgage needs of our customers and exceed their expectations.

We work with underwriters and loan processors from the application date until closing to gather necessary documentation and guide the file through the approval process.
Our mortgage loan originator is your main point of contact throughout the entire home loan process.

First and foremost, our loan officers are committed to a height standard of honesty and integrity.

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