A $450,000 construction-to-permanent loan priced at 6.75% for 30 years has an estimated principal-and-interest payment of $2,919 per month after conversion to the permanent phase. At 7.125%, the same loan is about $3,031 per month – a $112 monthly difference and $6,720 over five years. In this worked example, a 1.00% broker fee equals $4,500, while a preferred title company can save an additional $2,000 on average. That is why searching for the best construction loan lenders should not stop at a rate advertisement. The structure, draw process, fee disclosure, and permanent-loan terms matter just as much.
Duane Buziak, NMLS #1110647
Table of Contents
- Why construction financing needs broker shopping
- Construction-to-permanent loan mechanics
- Broker vs. single-shelf institution comparison
- Virginia pricing, credit, and reserve benchmarks
- Questions to ask before choosing a construction program
- Frequently asked questions
Why the best construction loan lenders are usually found through a broker
New construction is not a standard purchase transaction with a single closing date and a finished home to appraise. You are financing land or payoff, site work, materials, labor, inspections, builder draws, and ultimately a completed property. A small difference in program rules can decide whether a build moves forward or stalls before the first foundation pour.
A mortgage broker represents the borrower, then compares available wholesale investor programs for the scenario. A single-shelf institution can offer only its own menu. That difference is especially meaningful for Virginia buyers building in Goochland, Louisa County near Lake Anna, or Hanover, where land value, well and septic requirements, and appraisal support can vary dramatically by parcel.
Broker access is not a promise that every borrower receives the lowest possible rate. Pricing depends on credit, loan-to-value ratio, property type, reserves, builder approval, lock terms, and market movement. It does mean the file can be matched to a program rather than forcing the buyer into one institution’s overlays. Duane Buziak has access to 500+ wholesale investor options through Coast2Coast Mortgage, a meaningful advantage when construction rules differ from one program to the next.
How a construction-to-permanent loan works
Most Virginia buyers prefer a one-time-close construction-to-permanent structure. You close once, construction funds are released in scheduled draws, and the financing converts to permanent repayment when the home is complete. During construction, payment requirements may be interest-only on drawn funds, depending on the program. Once conversion occurs, the full amortizing payment begins.
The alternative is a two-close structure: one closing for construction financing and another for the permanent mortgage. It can make sense in limited circumstances, but it creates a future qualification event and exposes the buyer to rate and market uncertainty before the second closing. A one-time-close option can be cleaner, but it depends on builder eligibility, property type, occupancy, and the program selected.
The appraisal is based on the completed plans and specifications, not a partially built structure. If the appraised value comes in below total land-plus-construction cost, the buyer may need more cash, a revised scope, or a different financing approach. This is one reason a broker should review the builder contract, budget, plans, allowances, and contingency before preapproval.
Broker vs. single-shelf institution
| Decision point | Mortgage broker model | Single-shelf institution model |
|---|---|---|
| Program access | Can compare construction options across wholesale investors | Limited to that institution’s available programs |
| FICO floors | Can look for a program whose published credit rules fit the file | Uses its own credit overlays and approval standards |
| Program breadth | Can evaluate conventional, VA, FHA, jumbo, bank-statement, and other eligible paths | May not offer every construction-compatible option |
| Pricing flexibility | Compares rate, points, fees, lock period, and credits among investors | Pricing comes from one rate sheet and one compensation structure |
| Builder and draw rules | Matches builder approval and draw administration to program requirements | Requires the builder and project to fit its internal process |
The $112 monthly example above is hypothetical, not a rate quote or guarantee. Its five-year payment difference is $6,720. Add the $1,125 difference between a $4,500 broker fee and a hypothetical $5,625 fee, plus the preferred title company’s average $2,000 savings, and the illustrated five-year impact becomes $9,845. Actual fees, title charges, rates, and eligibility must be disclosed in writing for your specific transaction.
Virginia construction financing benchmarks to know
Virginia remains a competitive market for well-located new homes, even where resale inventory has improved. Buyers in Short Pump, Midlothian, and Charlottesville often compete for finished homes with modern layouts, while buyers seeking more land may look toward Ashland, Caroline County, or Lake Anna. New construction can provide control over location and design, but lot inventory, builder timelines, and appraisal support are local issues.
For statewide context, the Virginia REALTORS 2024 annual market data reported a statewide median sales price of $420,000. In Henrico County, Redfin’s market data reported a median sale price near $390,000 in 2025. Those figures are reference points, not construction appraisals. A custom home in Glen Allen or a waterfront-oriented design near Lake Anna can be valued very differently from the county median because acreage, finished square footage, features, and comparable sales drive the appraisal.
For 2026, the baseline conforming loan limit is $832,750 in most U.S. counties, with higher limits in designated high-cost areas. Virginia buyers should confirm the applicable county limit before assuming a conventional construction structure fits. Above the applicable limit, a jumbo construction program may be necessary.
Credit expectations vary. Some conventional construction options may start around a 680 FICO score, while stronger pricing is often available at 720 or above. Jumbo construction files frequently call for 700 to 740 scores, depending on loan-to-value and property details. Reserve requirements also vary: two to six months of full housing payments is common, while jumbo or higher-risk profiles may require 12 months or more.
Closing costs on construction financing often fall around 2% to 5% of the loan amount before any points, prepaid items, or builder-specific charges. On the $450,000 example, that is roughly $9,000 to $22,500. Ask about our no-out-of-pocket closing options when reviewing the final structure, but do not confuse that option with an absence of costs. Costs are typically paid through pricing, credits, seller or builder contributions where permitted, or cash at closing.
Start with the builder, lot, and soft credit review
Before you sign a builder contract, confirm whether the builder is eligible under the intended program and whether the lot is owned, being purchased, or already pledged as equity. Review the construction budget for site work, grading, utility connections, permits, contingency funds, and allowances. A low base price can become an expensive project when those items are excluded.
A soft credit pull mortgage review can help establish a planning range without immediately creating a hard inquiry. If you are researching a no hard inquiry mortgage pre approval, mortgage pre approval without hard pull, or no credit hit mortgage application, ask exactly what type of credit report is being used and when a full application will require authorization. A soft pull mortgage broker can help you protect credit while you compare options, but final underwriting still requires verified credit, income, assets, and property documentation.
Questions that separate a good construction program from a costly one
Ask whether the rate is locked through construction and conversion, how long the lock lasts, and what happens if the build runs late. Ask how many draws are permitted, who orders inspections, whether draw fees apply, and how quickly the draw administrator releases funds. Also ask whether the builder can make changes after closing and how cost overruns are handled.
For veterans, ask whether a VA construction structure is available for the specific property and builder. For self-employed buyers, ask what documentation is accepted and whether business liquidity can satisfy reserve requirements. For investors, construction financing can be more restrictive than a completed-property DSCR loan, so the exit strategy must be reviewed before land is acquired.
Frequently asked questions
Is a construction loan harder to qualify for?
It can be. In addition to normal credit, income, and asset review, the broker must evaluate the builder, plans, budget, appraisal, and draw schedule.
What credit score is needed for a construction loan?
Many programs look for at least 680, but the appropriate score depends on loan type, equity, reserves, and the completed property’s value.
Can I use land equity as my down payment?
Often, yes. Eligible land equity may count toward required equity, subject to appraisal, title review, and program rules.
Are construction rates higher than standard mortgage rates?
They can be, particularly when longer rate locks, draw administration, or specialized program features are involved. Compare the full cost structure, not the note rate alone.
Can I get preapproved without a hard credit inquiry?
A soft credit review may support early planning. A final approval requires full documentation and authorized credit review.
How long does construction financing last?
Construction periods commonly run 9 to 12 months, though larger or custom projects may need longer terms.
Can a builder choose the mortgage company?
A builder may recommend a provider or offer incentives, but buyers should compare the total costs, terms, and service with an independent broker option.
What happens if the home appraises low?
You may need additional cash, a reduced budget, a revised contract, or a program change. Addressing appraisal risk early is far easier than solving it after plans are finalized.
Legal disclaimer: Mortgage programs, rates, fees, credit requirements, reserve requirements, and underwriting standards are subject to change and borrower qualification. This article is educational information, not a commitment to extend credit, legal advice, tax advice, or a guarantee of approval. Equal Housing Opportunity. A licensed mortgage professional should review your individual circumstances before you make a financing decision.
The right construction financing conversation starts before the builder contract is signed. Bring the lot details, plans, budget, and timeline to a broker review so the financing supports the home you intend to build.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.