Whether you're buying land, building, or renovating, the loan has to fit the project, the budget, the timeline, and what happens when the work is done. If you already own your lot, you're starting from the strongest position.
*Available on qualifying programs; eligibility, leverage, loan amounts, and terms vary by program, occupancy, and property. Up to 95% LTC applies to the two-time-close construction loan on primary residences and second homes. Loan amounts above $850,000 are available through the jumbo construction-to-permanent program, which uses lower leverage. Up to 80% LTV applies to full-documentation lot and land loans; alternative-income land loans go up to 65% LTV on purchases.
Reviewed by Taylor Cabaniss, Founder & Mortgage Broker, NMLS #910852Updated
Financing the land and the construction at the same time is difficult, and often not possible. The smoothest path is to own your lot first. On qualifying programs, its equity can count toward the construction loan, and the construction loan can pay off an existing lot loan at closing. Depending on the program and your equity, that can significantly reduce, and in some cases cover, the cash you'd otherwise bring. Closing costs and program requirements still apply.
What a second closing means: with the two-time close, the permanent mortgage is a separate loan. You'll requalify for it when the build is complete, the permanent rate isn't locked during construction and will reflect the market when you close, and you'll pay a second set of closing costs. The upside is flexibility, including FHA and VA as permanent options.
About adjustable rates: the jumbo construction-to-permanent program converts to an adjustable-rate mortgage, and the conventional one-time close offers adjustable-rate options. After the initial fixed-rate period, your rate adjusts periodically based on a market index and can increase, which can increase your monthly payment. On some programs, the rate cannot adjust below your starting rate even if market rates fall.
Building to sell or to rent? Spec homes, infill, build-to-rent, and multiple builds are on our investor page. See Investor Construction Financing
Because there's no home on the land yet, lot loans are generally treated as non-owner-occupied, even when you plan to build your own home there. Running a full-time farm or ranch? Talk to our team about your operation.
A couple owns a lot and is ready to build. Its equity counts toward the construction loan. A two-time-close loan finances the build, and when the home is finished they requalify and close on a VA loan as their permanent mortgage.
A one-time close covers the construction loan and the permanent mortgage in a single closing. A two-time close uses a construction loan first, then a separate permanent mortgage, which means requalifying, a second set of closing costs, and a permanent rate set at that time.
On qualifying programs, yes. Equity in a lot you own can count toward the construction loan, and the construction loan can pay off an existing lot loan at closing. Closing costs still apply.
The two-time close and the conventional one-time close go up to $850,000. Jumbo construction-to-permanent financing runs from $1 million to $20 million, with leverage stepping down above $3 million.
Land generally requires more down than a home. Full-documentation lot and land loans go up to 80% LTV, meaning at least 20% down. Alternative-income land loans go up to 65% LTV on purchases.
It's difficult, and often not possible. The smoother route is to buy the lot first, then use its equity toward the construction loan when you're ready to build.
Let's TalkThe land, the plans, the budget, and the timeline. We'll show you which program fits and what your lot can do for you.
Loan programs, terms, eligibility, loan amounts, down-payment requirements, credit requirements, and closing timelines are subject to lender guidelines and may change. Not all borrowers or properties will qualify. Adjustable-rate mortgages carry interest rates that may increase after the initial fixed-rate period.
Lowcountry Home Loans | NMLS #1717832 | 802 Coleman Blvd, Suite 209, Mt. Pleasant, SC 29464 | 843.800.0178