A construction loan to permanent mortgage is one financing path that pays for the build and then becomes a standard long-term mortgage. It happens either through one closing (single-close) or two (two-close), and the choice changes your costs, your rate risk, and how much of your finances get re-examined at the end of the build. This article, from Duane Buziak at Short Pump Mortgage by Duane Buziak, walks through how each path works, what the draw and conversion steps look like, and how a Henrico County lot owner or teardown builder can pick a structure, starting with a soft pull pre-approval through NoTouch Credit Pull.
Written by Duane Buziak, NMLS #1110647 | Coast2Coast Mortgage LLC NMLS #376205
Single-Close vs. Two-Close: The Two Ways a Construction Loan Becomes a Mortgage
In a single-close (also called construction-to-perm) loan, you apply once, close once, and pay one set of closing costs. After the home is finished, the loan converts automatically to a permanent mortgage. Depending on the program, the rate is either locked at the start or set at conversion, and some programs offer a float-down, which lets you take a lower market rate if rates fall before conversion.
In a two-close structure, a short-term construction loan closes first. When the home is complete, you close a separate permanent mortgage, called the end loan, with fresh underwriting. You requalify at that point, and the end-loan rate is either floating or locked on its own terms. That means two sets of fees and, usually, a second appraisal and title work.
Terms you will see in the paperwork
- Draw schedule: the stages at which funds are released to the builder, tied to completed work.
- Interest-only period: the construction phase, when you pay interest only on the amount drawn so far.
- As-completed appraisal: a value opinion based on the plans and specifications, as if the home were finished.
- Certificate of occupancy: the county’s sign-off that the home is safe and legal to occupy. Conversion generally depends on it.
- Change order: a written change to the original plans or budget, which can affect cost, timing, and sometimes the loan amount.
Why “rolling over” is the wrong mental model
A construction loan is not a mortgage you simply roll over. Even in a single-close loan, conversion depends on the completed home passing final inspections, the final appraisal supporting the value, and the file staying in good shape. In a two-close, your income, credit, and debts are reviewed again. A new car loan or a job change during the build can matter more than most buyers expect.
The Build-to-Conversion Timeline, Step by Step
The sequence is fairly consistent, even though each file differs:
- Pre-approval, lot review, and builder approval.
- Plans and budget review.
- As-completed appraisal based on plans.
- Closing.
- Draws, each following an inspection.
- Final inspection and certificate of occupancy.
- Conversion to the permanent mortgage.
How draws work
The lender Duane Buziak places your file with holds the construction funds and releases them to the builder in stages, usually after an inspector confirms the work is done. You typically pay interest only on the balance drawn, so early payments are small and grow as more of the loan is used. Builders are often vetted by the lender first, so confirm your builder’s approval status before you sign a contract.
How long it takes
Many custom builds run roughly 9 to 12 months, but builder schedules and Henrico County permitting times vary, so treat that as a planning range rather than a promise. The usual causes of delay are weather, material shortages, and change orders. If the build runs past the loan’s construction term, lenders commonly charge an extension fee or require a short extension agreement. Ask what that term is and what an extension costs before closing, not after.
Where the soft pull fits</h3
The earliest step is also the cheapest to get right. A soft credit pull mortgage review through NoTouch Credit Pull lets you see how you qualify before any hard inquiry hits your report. That matters on a build, where you may compare a single-close and two-close structure and want to explore both without stacking inquiries.
Which Loan Programs Convert: FHA, VA, USDA, Conventional and Jumbo
Not every program offers construction financing, and those that do are offered by a limited set of lenders. That is where access to 500+ wholesale lenders helps Duane Buziak find a match. The table below is a general guide as of 2026; program rules and lender overlays change, so each file is confirmed individually.
| Program | Minimum Down Payment | Credit Minimum | Mortgage Insurance / Fee | Construction-to-Perm Availability |
|---|---|---|---|---|
| FHA | 3.5% | Program allows low scores; lender overlays often higher | Upfront and annual mortgage insurance premium | FHA One-Time Close exists; few lenders offer it |
| VA | 0% for eligible borrowers | Duane Buziak places files down to 500 FICO; construction lenders often set higher | VA funding fee unless exempt | Limited lender availability; verify per file |
| USDA | 0% | Lender-specific | Upfront guarantee fee and annual fee | Depends on parcel eligibility and lender; confirm with USDA |
| Conventional | As low as 3% to 5% on some products; more common on construction | Typically mid-600s or higher | PMI below 20% equity | Widely available as single-close or two-close |
| Jumbo | Often 10% to 20% | Typically higher | No PMI on some products; reserves required | Available from select lenders |
For FHA, review the current rules on the HUD single family housing resources and confirm One-Time Close availability with the lender. For VA, check VA.gov home loan guidance and ask whether the construction lender participates. For USDA, confirm with USDA Rural Development that the specific parcel is in an eligible area and that a one-time close option exists. Do not assume Short Pump parcels qualify.
Where conforming turns into jumbo
The FHFA 2026 conforming loan limit is $806,500 for a baseline county and up to $1,249,125 in high-cost areas, as published on the FHFA conforming loan limit page. A loan amount above the limit that applies to the property becomes jumbo. Most Henrico builds sit comfortably under it, but a larger custom home might not.
Two caveats. Construction lenders can set overlays tighter than program minimums, so a 500 FICO VA file may need a different lender than a 700 FICO one. And Dynamo DPA and Turbo DPA eligibility on new construction is lender- and program-specific, so it must be confirmed on each file.
Worked Dollar Example: Building a Home in Henrico County
Suppose you own a lot worth $75,000 free and clear and plan a $450,000 build, for a finished value near the $520,000 local median. These figures are illustrations, not quotes. Rates and fees depend on credit, lender, and market, and any rate shown is an assumed example as of 2026.
Loan amount and equity
Total project cost is $525,000 ($75,000 lot plus $450,000 build). Some lenders count lot equity toward the down payment, but that is lender-specific. If the $75,000 lot equity covers roughly 14% of cost, you might borrow the $450,000 build budget. Assume an illustrative 7.0% rate.
Interest-only cost during the build
Monthly interest equals drawn balance times rate divided by 12:
- 25% drawn ($112,500): about $656 per month
- 50% drawn ($225,000): about $1,313 per month
- 75% drawn ($337,500): about $1,969 per month
- 100% drawn ($450,000): about $2,625 per month
Averaging around half drawn over the build, a 10-month project costs roughly $13,000 in interest. Budget for it, because it is real cash out of pocket.
Final payment
After conversion, a $450,000 loan at an illustrative 7.0% over 30 years has a principal-and-interest payment of about $2,994, before taxes, insurance, and mortgage insurance.
Fees: single-close vs. two-close
Suppose closing costs run an illustrative $9,000 at each closing. A single-close pays that once. A two-close pays it twice, roughly $18,000, with a second appraisal and title work included. Actual fees vary, and some borrowers can structure no-out-of-pocket closing options depending on the file.
The cost of rate risk
If you float in a two-close and the rate moves from 7.0% to 7.5% between closings, the payment on $450,000 rises from about $2,994 to about $3,146, roughly $152 more per month, or about $1,800 per year. A rate move of 0.5% in the other direction would help you, but you cannot count on that.
Local Data: What Building in Short Pump and Henrico Involves
The Henrico County median home price runs roughly $520,000 to $527,000 in 2026, depending on the source and month. Check current figures from Henrico County Real Estate Assessment and local MLS data before you set a budget. The county’s real estate tax rate is also published there; confirm the current rate and its effective date, since it feeds directly into your monthly escrow estimate.
Land is the constraint. Few vacant lots remain near Short Pump Town Center, West Broad Village, and Green Gate, so many projects are teardown, infill, or lot-owner builds. A teardown adds demolition and utility costs to the budget, and lenders want those itemized.
School zoning matters to many buyers. Confirm assignments for Deep Run High School, Pocahontas Middle School, and Nuckols Farm Elementary directly with Henrico County Public Schools before buying a lot, because boundaries can change and a listing is not an authority.
For a plain-language overview of how construction loans work and what to watch for, the CFPB has a construction loan explainer worth reading before you meet with a builder.
Duane Buziak vs. Retail Lenders: Why Construction Financing Needs a Broker
Duane Buziak, NMLS #1110647, is the author of this guide and a mortgage broker serving Short Pump and greater Henrico County.
Retail lenders offer one product shelf: whatever their own company underwrites. As a broker with access to 500+ wholesale lenders, Duane Buziak can compare single-close and two-close options, overlays, and lock policies side by side, then match them to your credit, builder, and timeline. For construction, where few lenders offer FHA, VA, or USDA one-time-close options, that choice of lenders is often the deciding factor.
The soft pull matters here too. NoTouch Credit Pull, a no hard inquiry mortgage pre approval, lets you explore several structures without a credit hit. A mortgage pre approval without hard pull is not a lesser version of the real thing; it gives you a starting point, and a hard pull comes later once you choose a path.
The track record is verifiable: 1,400+ five-star reviews, Scotsman Guide Top Originator 2025 and 2026, and UWM PRO ELITE 2025.
Questions to ask any construction financing provider
- Is the rate locked at closing, at conversion, or floating, and is there a float-down?
- What is the construction term, and what does an extension cost?
- Does the builder need lender approval, and how long does it take?
- Who orders and pays for draw inspections?
- What happens if the final appraisal comes in below the as-completed value?
- Can lot equity count toward the down payment?
Construction Loan to Permanent Mortgage FAQ for Short Pump Buyers
Can I get a single-close construction loan in Short Pump with 3.5% down?
Possibly, through an FHA One-Time Close, as of 2026, but few lenders offer it and overlays vary. Duane Buziak checks which lenders currently do.
Do I need to own a lot to start?
No, but owning one simplifies things. Many lenders can finance the lot purchase and the build together, and lot equity may count toward your down payment depending on the lender.
Can I use FHA or VA to build in Henrico County?
Yes, in some cases. Both programs have construction options, but only select lenders offer them, so availability must be confirmed per file.
What credit score is needed?
It depends on the program and lender. VA files can go down to 500 FICO with Duane Buziak, but construction lenders often set higher minimums, so a soft pull review is the best first step.
Can I get a mortgage pre approval without hard pull for a build?
Yes. A soft pull mortgage broker like Duane Buziak can review your qualification through NoTouch Credit Pull, so you can compare options with no credit hit on a mortgage application at the pre-approval stage.
What happens if my build runs over schedule?
You may owe an extension fee or need a short extension agreement if the build passes the construction term. Ask about the term and cost before closing.
Does DPA work on new construction?
Sometimes. Dynamo DPA and Turbo DPA eligibility on construction is lender- and program-specific and must be confirmed on each file.
Is the conforming limit enough for a Henrico build?
Usually yes. The 2026 FHFA baseline is $806,500, with a high-cost ceiling of $1,249,125, and most Henrico builds fall under the limit that applies to the property.
Pick the Structure by Rate Risk, Timeline and Program
Single-close favors buyers who want one set of costs and less rate uncertainty. Two-close can suit buyers who expect their finances to improve or who need a program that only works that way. Your program, your builder’s approval, and the length of the build should decide it, not habit.
Ready to find the right mortgage solution for your Short Pump area home? Connect with our local mortgage experts today for personalized guidance and access to multiple lenders who compete for your best rate. Start with a NoTouch Credit Pull pre-approval by calling (804) 212-8663 at Short Pump Mortgage by Duane Buziak.