Financing a new construction home works nothing like financing a resale. You’re qualifying for a loan before the house exists, coordinating draw schedules with a builder, and often locking a rate months before you’ll actually need it. By the end of this guide you’ll know how to get pre-approved, pick the right construction loan structure, and lock a rate without derailing your build timeline. Before you start, have your builder contract (or at least a target builder), an estimated build cost, and your lot status (owned outright or still being purchased) ready. You can also get pre-approved with a soft credit pull mortgage that won’t ding your score while you compare options, which matters a lot when a build can stretch six to twelve months and you may need to requote more than once.
Step 1: Get Pre-Approved Using a Soft Credit Pull, Not a Hard Inquiry
Get pre-approved before you tour a single model home, using a soft-pull process instead of a standard hard inquiry. NoTouch Credit Pull is Duane Buziak’s soft-pull pre-approval process: it estimates what you qualify for using self-reported financial data and bureau-lite information, with no hard inquiry mortgage pre approval hit to your credit score, unlike the hard pull most retail lenders run upfront.
Builders almost always require proof of financing before they’ll sign a construction contract or lock in a lot. If you walk into a builder’s office without financing lined up, you’ll likely get steered straight to their in-house lender on the spot, under time pressure, with no basis for comparison. Getting pre-approved first flips that dynamic: you walk in with a number, a rate range, and leverage. Working through tools to get pre-approved for a mortgage before you talk to a builder puts you in a much stronger negotiating position.
Duane Buziak, NMLS #1110647, of Coast2Coast Mortgage LLC, NMLS #376205, runs this soft credit pull mortgage step before ever shopping construction lenders on a client’s behalf. The process typically takes a short conversation plus documentation of income, assets, and the lot’s status. Because it’s a mortgage pre approval without hard pull, you can also use it to re-shop rates later in the process, when your build timeline firms up, without stacking inquiries on your credit file. That matters more here than on a standard purchase, because a construction loan file often gets touched by underwriting more than once before you ever move in.
Step 2: Pick a Construction Loan Structure, One-Time-Close vs. Two-Time-Close
Your first real decision is structure: a one-time-close construction-to-permanent loan, or a two-time-close loan that requires a separate refinance once the home is done. A one-time-close loan locks a single set of terms that funds the build and then automatically converts to a permanent mortgage at completion, so you close once, sign once, and pay one set of closing costs.
A two-time-close loan splits the process into a short-term construction loan followed by a full refinance into permanent financing. The build loan and the eventual permanent loan are treated as two separate transactions, which means two separate underwriting reviews, two sets of closing costs, and two opportunities for something to go sideways. A common misconception among first-time builders is that the second closing is a formality. It isn’t. Your income, credit, and the property’s as-completed value all get re-verified at conversion, and if your financial picture or the rate environment shifted during the build, your terms can shift with it. If you want a deeper look at exactly how that conversion works, see our guide to converting a construction loan to a permanent mortgage.
The Consumer Financial Protection Bureau’s guidance on construction loans lays out these structural differences and the disclosures lenders are required to provide, and it’s worth reading before you sign anything with a builder’s preferred lender. For most borrowers building a primary residence, one-time-close financing reduces both cost and risk, but it isn’t offered by every lender or on every property type, which is another reason to compare options rather than default to whatever the builder hands you.
Step 3: Shop the Loan Across Wholesale Lenders Instead of the Builder’s Preferred Lender
Compare your builder’s preferred lender against outside options before you commit, because in-house lenders often bundle incentives that mask a higher rate or thinner product menu. Builders frequently offer credits toward upgrades or closing costs if you finance through their affiliated lender, and that credit can be worth less than what you’d save by financing elsewhere. A mortgage pre approval without hard pull comparison lets you check this without any risk to your credit score.
The structural difference is access. A broker like Duane Buziak works with 500-plus wholesale lending sources per file, pricing your loan across that pool to find the sharpest combination of rate and construction-loan terms. A builder’s in-house lender, and most retail lenders generally, sell from a single rate sheet with overhead built into every loan they close. If you’re weighing a broker against a direct retail lender more broadly, our comparison of mortgage broker vs. going direct to a lender breaks down those tradeoffs in detail. A soft pull mortgage broker can requote your file across multiple wholesale investors as your build timeline and rate environment change, without generating a stack of hard inquiries on your credit report.
Here’s how the structural differences typically break down:
| Factor | Duane Buziak (Broker) | Rocket Mortgage | Movement Mortgage |
|---|---|---|---|
| Pricing source | 500+ wholesale lenders, competitively priced per file | Single in-house rate sheet | Single in-house rate sheet |
| Pre-approval method | Soft credit pull mortgage (NoTouch Credit Pull) available | Hard credit pull for pre-approval | Hard credit pull for pre-approval |
| Construction loan menu | One-time-close and two-time-close options across multiple investors | Limited direct construction lending programs | One-time-close construction-to-permanent offered |
| Overhead structure | Independent broker, no retail branch network | Large retail/direct-to-consumer overhead | Retail branch network overhead |
| Licensed footprint | VA, FL, TN, GA, DC, NC, SC, MD | Nationwide | Nationwide |
None of this means a builder’s lender is automatically wrong for you, some do offer real, uncapped credits. It means you should get a second, no-hard-inquiry quote before deciding.
Step 4: Decide When to Lock Your Rate Given a Multi-Month Build Timeline
Lock your rate only after you have a firm completion estimate from your builder, because a standard 30 to 60-day lock rarely survives a build that takes six to twelve months. Locking too early on a standard term means you’ll either float unprotected near the end of construction or pay to extend a lock that’s already expired. Ask specifically about extended-rate-lock or float-down programs designed for construction timelines; some wholesale investors offer locks of 180 days or longer, occasionally with one float-down option if rates drop before your build finishes. Understanding how to qualify for a lower interest rate before you lock can also change the math on whether locking early or floating makes more sense.
The rate you lock, and when, has a real dollar impact. Suppose you’re financing $450,000 through a construction-to-permanent loan. At 6.5%, a 30-year principal-and-interest payment runs roughly $2,844 a month. At 6.875%, that same loan runs about $2,955 a month, a difference of roughly $111 a month. Over 30 years, that gap adds up to close to $39,900 in additional interest paid for the identical house, just because the lock timing or lender pricing was worse.
As of September 2026, average 30-year fixed rates have been hovering in the mid-6% range according to Freddie Mac’s Primary Mortgage Market Survey, though construction-to-permanent pricing typically carries its own adjustment on top of that baseline. Rates move week to week, so treat any figure you see, including this one, as a snapshot rather than a guarantee, and confirm current pricing before you lock.
Step 5: Budget for Draw Schedules, Contingency Reserves, and the Builder Appraisal
Construction loans release money in draws tied to completed milestones, not as a single lump-sum disbursement, so you need cash on hand to bridge gaps between draws. A typical schedule might release funds at the foundation stage, framing, drywall, and final completion, with an inspection required before each release. If a draw is delayed because an inspector’s schedule is backed up, your builder may still expect payment on time, which is a cash-flow problem you want to plan for rather than discover.
Build in a contingency reserve, commonly 5 to 10% of total build cost, to cover change orders and unexpected costs like a soil condition that requires additional foundation work. A frequent mistake is treating that reserve as spending money for upgrades early in the build and having nothing left when a legitimate overage shows up near the finish line. Keep it untouched until you’re past the final walkthrough. Running your numbers through a mortgage affordability calculator before finalizing your build budget can help you see how much cushion you actually have.
The appraisal on a construction loan is based on completed plans and specifications, not on the current dirt lot, and it’s called an as-completed appraisal. If that appraisal comes in lower than expected, it can reduce the permanent loan amount available at conversion, potentially leaving you short at closing. Ask your loan officer early, before you finalize plans with your builder, how the as-completed value is likely to compare with your total project cost so there are no surprises when the loan converts.
Step 6: Close on the Construction Loan and Convert to Your Permanent Mortgage
At the certificate of occupancy, your loan either converts automatically to permanent terms if you chose one-time-close financing, or you complete a full second closing if you chose two-time-close. One-time-close conversion typically involves a modification of your existing note rather than a brand-new loan application, which keeps costs and paperwork lower. Two-time-close conversion means a fresh closing, updated title work, and a new set of closing costs on top of what you already paid at the start of construction.
Either way, expect some re-verification of income and assets before conversion, especially if your build ran long. A no credit hit mortgage application approach can often apply here too: within many wholesale investors’ guidelines, re-verification of employment and assets can be completed without pulling a new hard inquiry, though this depends on the specific program and how much time has passed. Confirm this directly with your loan officer before assuming it’s automatic. Having your mortgage documents organized ahead of the conversion review makes this step go faster.
Resolve your final walkthrough and punch list items before or immediately after closing, not weeks later. Builders sometimes want closing to happen before every last item is finished, and it’s reasonable to hold back a portion of funds in escrow until the punch list is complete. Waiting too long to resolve outstanding items after you’ve released full payment removes your leverage to get them fixed.
Construction Loan Questions Borrowers Ask Most
Can I use a construction loan for a lot I don’t own yet? Yes, most construction loan programs can include lot purchase in the same loan, rolling the land cost into your total construction budget rather than requiring a separate land loan first.
Do construction loans require a bigger down payment than a standard purchase? Often, yes. Many construction programs ask for 10 to 20% down depending on the lender and whether you already own the lot free and clear, which can reduce or eliminate the cash-down requirement.
Is LowerMortgageRates the same as Lower.com? No. LowerMortgageRates.com is operated by Duane Buziak, Mortgage Maestro, through Coast2Coast Mortgage LLC, NMLS #376205, and is not affiliated with Lower.com in any way.
Can I get a VA loan for new construction? Yes, VA-eligible borrowers can finance new construction, though the builder must be VA-registered and the property must meet VA minimum property requirements, which is worth confirming before you sign a contract.
Can I use an FHA loan for new construction? Yes, FHA offers a one-time-close construction-to-permanent option with a down payment as low as 3.5%, subject to standard FHA credit and property guidelines.
Are physician or doctor loans available for new construction? Yes, physician loan programs can be used for new construction through multiple lenders Duane works with, typically with reduced down payment requirements for qualifying medical professionals.
What’s the current conforming loan limit for a construction loan in 2026? The baseline conforming limit is $806,500, with high-cost areas going up to $1,249,125, based on FHFA’s 2026 conforming loan limit data; loans above these amounts fall into jumbo construction financing with different requirements.
Will checking rates with multiple lenders hurt my credit score? Not if you use a soft pull mortgage broker for the initial comparisons. A soft credit pull mortgage lets you compare pricing across lenders with no hard inquiry mortgage pre approval impact, saving hard pulls for when you’re ready to move forward.
How is interest calculated during construction? Most construction loans charge interest only on the funds actually disbursed in each draw, not on the full loan amount, so your payments start low and increase as more of the loan is drawn.
What happens if my build runs over budget? You’ll need to cover the overage out of pocket, through your contingency reserve, or through a change order added to the loan if your lender and the remaining budget allow it, which is another reason to keep that reserve untouched until the final walkthrough.
What to Lock In Before You Break Ground
Three decisions do more to shape your final cost than anything else: how you get pre-approved, which construction loan structure you choose, and when you lock your rate. Get those right early and the rest of the build, draws, inspections, punch lists, is largely a matter of staying organized rather than fighting your financing.
Duane Buziak, NMLS #1110647, and Coast2Coast Mortgage LLC, NMLS #376205, are licensed in Virginia, Florida, Tennessee, Georgia, the District of Columbia, North Carolina, South Carolina, and Maryland. If your build is in one of those areas, call 804-212-8663 to talk through your construction loan options.
Schedule your free consultation today and compare construction loan pricing across wholesale lenders with a soft-pull check that won’t affect your credit score.