Florida One-Time Close Construction Loans

Florida Construction Loan Breakdown

Our Florida construction loan can be used in conjunction with FHA, VA financing, USDA, and conventional financing. New construction is growing in demand as the ability to afford housing has become more difficult. New construction offers cheaper home owners insurance costs, and typically provides more affordable utility bills. A new roof and new appliances matter as well. All these factors play a significant role in home affordability. As a result of the higher interest rate climate home affordability matters more than ever. So it’s a good time to think about building a new home or buying a newly completed home.

Our construction loan is a one time close loan, as opposed to a two time close loan. At closing construction begins, then when construction is complete the mortgage is modified to begin its term. Terms follow program guidelines, 15, 20, 25, or 30 years for FHA, VA, and conventional financing. For USDA financing the only term allowed is 30 years. The appraisal is completed based on the land the home is going to be on, blueprints, and breakdown of materials being used to build the home. The more detailed the schedule of materials is the more accurate the appraiser can determine value.

Minimum Credit Score, DTI Limits, and Other Restrictions

Our Florida new construction loan requires a 700 credit score for conventional financing, and a 620 for FHA, VA, and USDA financing. For a manufactured home set up, the minimum score is 650. The maximum back end debt ratio is 45% for conventional, 56% for FHA. VA is based off of automated underwriting findings and can be as high as approximately 70%. Your back end debt ratio max is the max percentage of allowable monthly debt, including your proposed home payment.

Additionally the borrower will be required to have 2 months of reserves in savings, equal to their total mortgage payment after closing. If your credit score is below the requirements, feel free to reach out as we may be able to guide you in the right direction. This construction loan product is for primary residences only. Additionally the contract between you and your builder cannot be cost plus, it must be fixed.

Do I Need to Own My Land First?

You do not need to have land already paid for to use our construction loan. It’s very possible to have your plans ready to go and your builder picked out as you shop for the land you want to build on. We can issue you a pre-approval letter to buy the land, from there we can get your loan through underwriting, order your appraisal, and then at closing the first draw of your construction loan would go towards the purchase of the land.

However if you do own the land already, we can use the equity of your land to go towards the down payment and closing costs of your construction loan. Even if you have a loan on the land that you are still paying for we can use the equity of your land. The value of the land would be based on the appraised value if owned for more than 12 months. If you purchased the land within the last 12 months the value of your land would be based on the amount it was purchased for.

Can I Use Any Builder?

Your builder must be approved through our construction department. We look at experience. Have they only built a home or two? It might be difficult for them to be approved unless we can show more experience under another general contractor. With our one time close construction loan the general contractor must be licensed and insured. We will provide a builder registration form that can then be submitted along with accompanying docs for approval. You will use one general contractor to provide a contract for all the work including site prep. We do not allow for owner builds, you must use a general contractor. Builder approval can be done as you work on your plans and shop for land to expedite the process. Although it does not take very long to get approval once we have the needed docs.

How Much Down Do I Need?

We go off of agency guidelines for down payment requirements. That means if FHA requires 3.5% down then that’s what we require. For VA financing there is no down payment required, and the same for USDA financing. For conventional financing the minimum down is 5%. This is an advantage over two time close construction products because they typically have a higher loan to value requirement for the construction loan.

What Do I Need to Get Started?

First of all we will need a full loan application and to check credit, to get started get pre-approved. From there you need to choose a builder and we can submit them for approval. Then we need to have your blueprints, and the cost of materials breakdown. If you have land already you’re pretty much there because the builder can then give you a bid and then a contract for the build. If you don’t have land you would need to find a property and get it under contract, then a builder can provide a contract and correct bid based on any site prep needed on the particular lot you have found. With a contract (no cost plus contracts), blueprints, and cost for materials breakdown we can then disclose the construction loan to you. After disclosures are signed we can order the appraisal and bring you through the underwriting process.

Construction Loan Process Step By Step

First thing first, you need to have some house plans ready, either ones you bought online or have acquired through an architect or a builder. Once you have your builder picked out they have to be approved through us. Next up land. Do you own your land? Or do you need to find a lot? Next, you need to get under contract with your builder. Remember structuring in concessions from the builder for closing costs can help keep your out of pocket to a minimum. Once we have builder approval, a contract with the builder, and we know where the home is going, it’s time to disclose the loan and start underwriting. The underwriting process proceeds like any other loan, verifying income and assets.

Project Approval

While we work on underwriting you the borrower we also start to underwrite the project. That stage is called project approval. One thing needed for project approval is an appraisal. The appraisal is ordered using the blueprints and schedule of materials to be used. In the project approval phase they will make sure the contract has the following features:

• The contract is a fixed contract, not a cost plus contract.
• The build time must be no longer than 11 months (extensions may be granted, but the borrower may need to re-apply before closing).
• The contract must have a 5% contingency for overages.
• For VA construction loans, interest, taxes, insurance, and draw fees must be included in the cost schedule.

There will be a few disclosures needed as well like the following:

• Wire information for draws for the builder.
• A disclosure listing any items that have been pre-paid by the borrower.

Closing on Your Construction Loan

Once you have your appraisal, you have project approval, and your loan has been underwritten, it’s time to close. If you are buying a lot to build the home, the first draw at closing pays for the cost of the lot. If you own your land and there is still a lien on the land, the lien would be paid off at closing. The builder may have a draw at closing as well. Lastly, the first draw is limited to 10% of the cost of the home or $50,000, whichever is less.

What Happens After Closing and During Construction?

Your first payment will be due around a month after you close. Unlike some products where you pay a little interest up front and a lot at the end, our product has one payment throughout construction. It’s half of the monthly cost of the total loan amount. It’s simple really. Let’s say you have a $500,000 loan at 7% (example purposes only, rates vary). The total payment on that on a 30 year mortgage would be $3,326.51. Half of that is $1,663.26, that would be your payment during construction. So instead of a little up front and a lot later, it’s just a simple flat monthly interest charge.

The builder can get up to 12 draws including the draw at closing. Draw fees will be built into the loan. As work is completed the builder may request an inspection. Upon review of the completed work by an inspector the builder will receive funds. Once your home is completed and the certificate of occupancy is issued, a final inspection will be ordered by the appraiser to ensure completion. Your mortgage will then be modified from the construction phase into the term and loan program you selected. If the project is completed on time there will be no more qualification requirements.

Frequently Asked Construction Loan Questions

About the Author

Keith Meredith

Division President, Black Rock Mortgage
NMLS 303217 · 16+ years originating · $100M+ in mortgages closed

Keith Meredith is a 16 year mortgage industry expert who has originated over $100,000,000 in mortgages. Headquartered in Ocala, Florida, Keith runs Black Rock Mortgage as a division of Coast 2 Coast Mortgage, a lender licensed in 40 states. Keith specializes in manufactured home financing, self-employed mortgages, VA construction loans, and helping first-time buyers navigate FHA, USDA, and conventional programs. He creates written and video content to help borrowers understand their financing options.

Call or text directly: 352-619-4959 · Follow Keith on X, Facebook, Instagram, and LinkedIn

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