In short
A construction loan finances building a new home by paying the builder in inspected stages, then converting to a long-term mortgage when the home is finished. A one-time close does it with one approval and one closing. Minimum credit is 620 for conventional and FHA one-time close and 580 for VA.
Reviewed by Scottie Campbell, NMLS #1610726 · Last updated October 18, 2026
How does a construction loan work?
A construction loan pays your builder in stages, called draws, as the home goes up instead of releasing the full amount on day one. Each draw is released after the work is inspected. When the home is finished, the loan becomes (or is replaced by) a regular long-term mortgage. With a one-time close, that all happens under a single loan and a single closing. Minimum credit scores start at 620 for conventional and FHA one-time close and 580 for VA one-time close.
Key takeaways
Building a home is a different animal than buying one. There's land, plans, a builder, a budget and a timeline, and the financing has to hold all of it together. I'm Scottie Campbell, founder of Waymaker Mortgage Company, and I've been in mortgage since 2003. I'll help you choose the construction structure that fits your family, your builder and your budget, so you can decide with confidence before the first footing is poured.
Building vs. Buying: Why the Financing Is Different
When you buy an existing home, the lender is lending against something that already stands. When you build, the lender is lending against a set of plans, a builder's contract and an appraisal of what the home will be worth once it's finished. That's why construction loans come with a few extra moving parts: a builder review, a detailed budget, a draw schedule and inspections along the way.
Quite frankly, most of the stress I see on construction files comes from people learning about those moving parts too late. My job is to educate and empower you. Your job is to decide. So let's walk through it in order.
The Two Ways to Finance a Build
There are two basic structures.
Two-time close. You take out a short-term construction loan to build, then close a second time on a permanent mortgage once the home is done. That means two applications, two sets of closing costs, and qualifying all over again at the end. If your income, credit or the market shifts during the build, that second closing can get uncomfortable.
One-time close (construction-to-permanent). One application, one approval and one closing before construction starts. The construction phase and the permanent mortgage live inside the same loan, and when the build is finished it simply converts. This is the structure I recommend most often for families building a primary residence, because it takes the "will I still qualify in a year?" question off the table.
Which Program Fits Your Build
| Program | Minimum credit score | Down payment | Often a good fit for |
|---|---|---|---|
| Conventional one-time close | 620 | Depends on your scenario | Stronger files and more design freedom |
| FHA one-time close | 620 | 3.5% | Buyers who want a smaller down payment |
| VA one-time close | 580 | 0% for eligible veterans | Veterans and service members |
| USDA single-close | No USDA-set minimum; borrower specific | 0% | Moderate-income buyers building in eligible rural areas |
Each of these has its own page on this site if you want to go deeper. The short version: VA and USDA can mean no down payment, FHA keeps the down payment small, and conventional tends to give you the most room on the house itself.
What the Process Looks Like
- Strategy call. We talk through land, budget, timeline and which programs fit. I'll build you a Mortgage Action Plan so you know exactly where you stand and what, if anything, to work on first.
- Pick your lot and builder. Your builder is reviewed and approved for construction lending. A licensed, insured builder with a written, detailed contract makes everything smoother.
- Plans, specs and budget. The appraiser values the home from the plans and specifications, so the budget needs to be realistic and complete.
- Close. On a one-time close, everything is signed before ground is broken.
- Draws and inspections. As each stage is finished, an inspector confirms the work and funds are released to the builder.
- Final inspection and move-in. The home is completed, the certificate of occupancy is issued and you get your keys.
Already Own Your Land?
A lot of people come to me already owning a lot or a few acres. In many cases, equity in land you own can count toward the build, and some programs can roll an existing land payoff into the construction loan. The details depend on the program and on how long you've owned the land, so bring me your deed and payoff information and I'll show you what it means for your numbers.
Where Waymaker Comes In
- Many investors, not one desk. Waymaker Mortgage Company works with multiple investor partners, and construction guidelines vary a lot from one investor to the next. If one investor's rules don't fit your build, I take your file to one that does.
- Total Cost Analysis. A build has more cost layers than a purchase: the lot, construction-period costs, contingency, closing costs and the long-term mortgage. I look at the total cost over the time you'll own the home, not one number in isolation.
- High-tech, high-touch. Documents and draw paperwork move digitally, and you've got me on the phone when the framer says something you didn't expect.
On rates: Your rate depends on your scenario and the day's market. Reach out and I'll price it for real.
Building in Georgetown, TX
Whether you've already found a lot near Georgetown, TX or you're still sketching floor plans on a napkin, it's never a no. It's always a how. Feel free to text me, and let's get your build rocking and rolling.
Information on this page is general and educational. It is not a commitment to lend or an offer of credit. Programs, guidelines and eligibility change and depend on your full scenario. Waymaker Mortgage Company, NMLS 2440476. Equal Housing Lender.
Quick facts
- Loan structures
- One-time close (construction-to-permanent) or two-time close
- Minimum credit score
- 620 conventional and FHA one-time close; 580 VA one-time close
- Down payment
- 0% VA and USDA (eligible borrowers); 3.5% FHA; conventional varies
- How funds are released
- In draws to the builder after each stage is inspected
- Builder
- Licensed builder approved for construction lending
- Occupancy
- Primary residence on FHA, VA and USDA
Is this loan right for you?
Who it's for
- Families who want to build a primary residence instead of buying an existing home
- People who already own a lot or acreage and are ready to build on it
- Veterans and rural buyers who may qualify for 0% down VA or USDA construction
- Buyers who have a licensed builder and a clear set of plans in mind
Who it may not fit
- Investors building spec homes to sell
- Anyone planning to act as their own general contractor
- Buyers who need to move in within a few weeks
Pros and cons
Pros
- Build the floor plan and finishes you want instead of settling
- One-time close options mean one approval and one set of closing costs
- 0% down options for eligible VA and USDA borrowers, 3.5% on FHA
- Builder is paid only as inspected work is completed
- Land equity can often count toward the project
Trade-offs to weigh
- More paperwork up front: builder review, plans, specs and a detailed budget
- Construction timelines can slip, and change orders can add cost
- Credit minimums are higher than some standard purchase loans
Frequently asked questions
What credit score do I need for a construction loan?
It depends on the program. Conventional and FHA one-time close start at 620, and VA one-time close starts at 580. USDA sets no minimum score for its single-close program, so approval there is borrower specific. If you're not there yet, can't do it now doesn't mean can't do it ever. I'll build you a Mortgage Action Plan to close the gap.
Is a one-time close better than a two-time close?
For most families building a primary home, I lean toward a one-time close because you qualify once, close once and pay one set of closing costs. A two-time close can make sense if you expect a big change in your finances during the build, like selling another home. We'll compare both for your situation.
Can I use land I already own?
Often, yes. In many cases equity in land you already own can count toward the build, and some programs can pay off an existing land loan as part of the construction loan. How long you've owned the land and which program you use both matter, so send me your deed and payoff details.
Can I act as my own general contractor?
The programs on this page generally require a licensed builder who is reviewed and approved for construction lending, not an owner-builder. If you have a builder in mind, send me their information early so we can start the builder review while we work on your approval.
What happens if the build goes over budget?
That's why the contract and budget matter so much. A fixed-price contract puts cost risk on the builder, and some programs allow a contingency reserve (the USDA single-close program allows an optional 10%). Change orders you request mid-build may need lender approval and cash from you, so we plan for them up front.
What will my rate be on a construction loan?
Your rate depends on your scenario and the day's market. Reach out and I'll price it for real.
Related loan programs
Low down payment options, dozens of down payment assistance programs and a Greenlight Approval that helps your offer compete. It's never a no. It's always a how.
Flexible credit, low down payment, and dozens of assistance programs. I'll show you how FHA fits your plan, then you decide.
No monthly mortgage insurance, no minimum credit score on my end, and VA loans funded in house by Waymaker Mortgage Company with underwriting through multiple investors.
Last updated October 18, 2026 · Reviewed by Scottie Campbell, NMLS #1610726. This page is educational and not a commitment to lend; program details change — ask for current figures.