Buying land in Henrico County is not like buying a house. Retail lenders and many brokers treat raw and improved lots as higher risk, so rates, down payments and terms differ sharply from a standard mortgage. A lot can’t be lived in, can’t be easily resold in a downturn, and often has no income behind it, which is why the underwriting changes.
For a Short Pump buyer, that makes structure matter more than the headline rate. The same $600,000 project can cost very different amounts depending on whether the lot, the build and the permanent financing sit in one loan, two loans, or your existing home equity. These seven strategies show how Duane Buziak compares those structures against your build timeline and credit profile, using a mix of lot loan financing options that few single-source lenders can offer.
Written by Duane Buziak, NMLS #1110647 | Coast2Coast Mortgage LLC NMLS #376205
1. One-Time-Close Construction-to-Permanent Loan
A one-time-close loan funds the lot, pays the builder in draws as work is inspected, then converts to a permanent mortgage without a second closing. It works because you underwrite once, lock once, and pay one set of closing costs. The lender also gets comfort from owning the whole project: the lot is collateral from day one, and the draws are released only as work is verified.
Consider an illustration, not a quote. A buyer purchases a $150,000 lot and contracts a $450,000 build, for $600,000 total. Using a sample rate of 6.25% on a 30-year fixed (principal and interest only, taxes and insurance excluded):
- 5% down ($30,000): $570,000 loan, about $3,510 per month.
- 10% down ($60,000): $540,000 loan, about $3,325 per month.
- 20% down ($120,000): $480,000 loan, about $2,956 per month.
Many buyers use the lot itself as part of the down payment if they already own it, so check your equity in the land before assuming you need cash.
To put it into practice:
- Pick a builder, but first ask which builders the loan program accepts.
- Get a soft pull pre-approval so you can set a budget without a credit hit.
- Collect the plans, specifications and signed construction contract.
- Order the appraisal, which is based on the as-completed value.
- Lock the rate, then complete the draw inspections as the build progresses.
The common mistake is choosing a builder before checking the lender’s builder approval and contingency requirements. A favorite builder who can’t meet licensing, insurance or financial-review rules can stall a file after you have paid for plans. Measure total cash to close against a two-loan path, and compare the permanent rate to the current market rate, since some programs let you float down while others do not.
2. Standalone Lot Loan
A standalone lot loan finances land only. Because there is no house to secure the debt, these loans are usually held in a lender’s portfolio, with larger down payments, higher rates and shorter terms. Two terms matter here. Raw land has no road access or utilities, while an improved or buildable lot has them (or confirmed access to them) and a passed or pending perc test, the soil percolation test that shows whether a septic system will work. Improved lots finance more easily.
For example, imagine a $120,000 improved lot with 25% down ($30,000), leaving $90,000 financed. Suppose a 7% rate, a 15-year amortization and a five-year balloon. The payment is about $809 per month, and a balloon, a lump sum due when the short term ends, would be roughly $69,700. That figure is a hypothetical, but it shows why the balloon date drives the plan.
The steps:
- Confirm zoning, utilities and septic status with Henrico County before you sign anything.
- Order a survey and title work.
- Have your broker compare terms from several sources rather than a single bank.
- Map out the later construction loan, including when you will apply for it.
The pitfall is ignoring the balloon date, or the cost of a second loan and second closing. If construction slips, you may need to refinance land under worse conditions. Measure total interest and fees through the planned build date, then set that figure beside the one-time-close option from strategy 1. A standalone loan wins mainly when you plan to hold the land for years before building.
3. Government-Backed Path (VA, FHA, USDA)
Government-backed programs rarely finance a bare lot by itself. They work when the lot is bundled into a construction loan or a builder’s lot-plus-home contract, so the land becomes part of a project that ends in an owner-occupied home. That is the key mechanism: the program insures the finished home, not the empty parcel.
Imagine a veteran building with no down payment through a one-time-close VA construction loan. The appraisal reflects the as-completed value, and the buyer pays a funding fee that depends on service history and down payment. The VA funding fee and closing cost page lists current rates. Availability varies, since not every lender offers VA or FHA construction financing. Duane Buziak can reach options through 500+ wholesale lenders, and VA loans can work down to a 500 FICO with the right lender.
To put it into practice:
- Request a NoTouch Credit Pull first, so you can test eligibility without a hard inquiry.
- For USDA, check the address on the official USDA eligibility map. Not every Henrico address qualifies.
- Confirm the builder is approved by the program and the lender.
- Compare the VA funding fee against FHA mortgage insurance for your situation.
The common mistake is assuming FHA or VA will finance a bare lot. Buyers who start with that belief often sign a land contract and then discover the program will not apply. Measure the down payment required and the monthly payment including insurance or funding fee, not the rate alone.
4. Home Equity or Cash-Out Refinance
If you already own a Henrico home, its equity can buy the lot outright, which avoids lot loan pricing entirely. You then finance the build later, often as a construction loan with the land as your equity. Cash purchases also strengthen offers on lots, which sellers value.
For example, imagine a $525,000 home with a $300,000 balance. At 80% combined loan-to-value (LTV, the total debt divided by the value), you could carry $420,000 in debt, leaving about $120,000 in equity before costs. That would cover the lot from strategy 2 with money to spare.
The steps:
- Run a soft pull. A soft credit pull mortgage review shows what you qualify for without touching your score.
- Compare a HELOC, a fixed home equity loan and a cash-out refinance.
- Check what happens to your existing first-mortgage rate under each.
- Close, then buy the lot.
The classic pitfall is refinancing a low first-mortgage rate when a separate equity loan would cost less overall. Replacing a 3% first mortgage to pull $120,000 can raise the rate on the entire balance, not just the new money. Measure the blended rate across all debts and the change in your monthly payment. A HELOC also carries a variable rate, so plan for the repayment if the build runs long.
5. Seller Financing or Builder Incentives
Seller financing means the owner of the lot carries a private note, so you skip bank underwriting on the land. Builder incentives, such as a lot package or rate buydown, shift value into the deal in a different way. Both work because the party offering them benefits from closing the sale.
Take an illustration: a seller carries a $90,000 note at a negotiated 6% on a five-year, interest-only term. The payment is $450 per month. A bank quote at 7.5% would be about $562.50, a difference of $112.50 per month, or $6,750 over five years. But a seller note may carry a balloon, and the savings vanish if you have to refinance in a bad market.
To put it into practice:
- Have an attorney draft the note and deed of trust.
- Run a title search for existing liens.
- Ask for any builder incentive in writing.
- Only then compare independent rate quotes.
The most common mistake is accepting a builder incentive without comparing the rate and fees against outside quotes. An incentive tied to the builder’s preferred lender may be worth less than a lower rate elsewhere. Measure the net value of the incentive after any rate difference. If the preferred lender’s rate is half a point higher, over 30 years that can erase a credit worth thousands.
6. Non-QM Options (Bank Statement, DSCR, Asset Depletion)
Non-QM loans qualify borrowers on documentation outside the standard tax-return model. They suit self-employed buyers whose taxable income understates their cash flow, and investors buying a lot to build a rental. Bank statement loans use deposits, DSCR loans use the property’s rental income, and asset depletion uses savings.
Imagine a self-employed buyer with strong monthly deposits but low taxable income after write-offs. Instead of two years of tax returns, the borrower qualifies on 12 or 24 months of bank statements. That can unlock a lot and build that the agency rules would decline.
The steps:
- Gather bank statements, entity documents and proof of reserves.
- Compare non-QM pricing against agency options.
- Confirm the lender allows land or construction under the specific program, since many do not.
- Request a mortgage pre approval without hard pull so shopping does not cost points on your score.
The pitfall is using non-QM by default when an agency loan would be cheaper. Non-QM carries a rate premium and often a larger down payment. Duane Buziak recommends running both paths before committing. Measure the rate premium and any additional down payment against the agency option, then decide whether the flexibility is worth the difference.
7. Stack Down Payment Assistance and Reserves
Lot projects fail on cash planning more often than on approval. The full cost includes permits, utility tap fees, survey and site work, which no mortgage covers neatly. Stacking assistance, reserves and closing-cost strategy around the whole project keeps you from running out of money mid-build.
Take an illustration with a $600,000 finished home. With FHA at 3.5% down ($21,000) and assumed closing costs of 2.5% ($15,000), cash to close is about $36,000. Add a placeholder $35,000 for permits, tap fees, survey and site work, and the project needs $71,000. If assistance covers the down payment, the need drops to about $50,000. These figures are assumptions for planning, not quotes.
To put it into practice:
- Confirm DPA eligibility for the finished home, including Dynamo DPA or Turbo DPA.
- Budget for site and permit costs on a separate line.
- Ask for no-out-of-pocket closing options, such as lender credits or seller contributions.
- Choose a no credit hit mortgage application route while comparing, so repeated quotes do not add inquiries.
The mistake is assuming DPA funds can be used for a standalone lot. Assistance generally attaches to the purchase of the finished primary residence. Measure total cash required at closing and your remaining reserves after closing. Lenders often want reserves left after the build, so a thin cushion can sink an otherwise approved file.
How the seven structures compare side by side
Henrico sits under the baseline FHFA conforming limit of $806,500 for 2026, with $1,249,125 as the high-cost ceiling, per the FHFA 2026 conforming loan limit announcement. With a local median of roughly $520,000 to $527,000, most Short Pump builds fall within agency limits. The table below shows typical ranges as of October 2026; actual terms vary by lender.
| Financing option | Typical down payment | Credit minimum | Rate type | Soft pull available |
|---|---|---|---|---|
| One-time-close construction | 5% to 20% of total project | Often 620 to 680, varies | Fixed permanent rate, short interest-only phase | Yes, with NoTouch Credit Pull |
| Standalone lot loan | 20% to 30% or more | Often 680 or higher | Fixed or adjustable, short term with balloon | Varies by lender |
| VA, FHA or USDA construction | 0% VA and USDA, 3.5% FHA | VA to 500 FICO with the right lender; FHA and USDA vary | Fixed | Yes, with NoTouch Credit Pull |
| Home equity or cash-out | Based on 80% combined LTV for most | Often 620 or higher | HELOC variable; equity loan and refinance fixed | Yes |
| Seller financing | Negotiated | Set by seller | Negotiated, often short with balloon | Not applicable |
| Non-QM (bank statement, DSCR, asset depletion) | Often 10% to 25% | Often 660 or higher | Fixed or adjustable | Yes, with a soft pull mortgage broker |
| Duane Buziak, 500+ wholesale lenders | Matched to program, from 0% on VA and USDA | Matched to program, VA to 500 FICO | Compares fixed, adjustable and interest-only | Yes, NoTouch Credit Pull, no hard inquiry mortgage pre approval |
What a wholesale broker does differently on land deals
Retail lenders offer their own product shelf, so a lot buyer sees one construction program and one land product. A broker with 500+ wholesale lenders can test the same project against portfolio lot loans, government programs and non-QM options, then recommend the structure that costs least over your timeline. Retail lenders may also run a hard pull at application. Duane Buziak at Short Pump Mortgage by Duane Buziak starts with a NoTouch Credit Pull, so you can compare structures before any hard inquiry.
Short Pump and Henrico lot financing questions
Can I get a mortgage in Short Pump with a soft credit pull?
Yes, you can start with a soft pull to review options before any hard inquiry. A soft credit pull mortgage review shows your range without affecting your score.
Can FHA or VA buy a bare lot in Henrico County?
No, FHA and VA generally do not finance a bare lot alone. They work when the lot is part of a construction loan or a builder’s lot-plus-home contract.
How much do I need to put down on a lot in Short Pump?
Standalone lot loans often require 20% to 30% or more as of October 2026, depending on the lender. A one-time-close loan can require as little as 5%, and VA or USDA construction can require none.
Does every Henrico address qualify for USDA?
No, USDA eligibility depends on the specific address. Check it on the official USDA map before assuming it applies.
Can down payment assistance be used on a lot in Short Pump?
Generally no, since assistance attaches to the finished primary residence rather than a standalone lot. Confirm eligibility with Duane Buziak before you budget around it.
What is the 2026 conforming loan limit for Henrico County VA?
The 2026 baseline conforming limit is $806,500, with a high-cost ceiling of $1,249,125. Henrico falls under the baseline figure.
Can I get pre-approved for a build without a hard pull?
Yes, a NoTouch Credit Pull supports a mortgage pre approval without hard pull. Final underwriting will still require a full credit check later.
What costs should I budget beyond the lot price in Henrico?
Budget for the survey, permits, utility tap fees, septic or perc testing and site work. Confirm current Henrico fees with the county, as they change.
Confirm the lot first, then pick one path
Before you sign a contract, confirm the lot’s zoning, utilities and program eligibility. A lot that fails a perc test or sits outside a USDA-eligible area can change every number above. Then start with the one-time-close loan in strategy 1, or an equity-funded purchase in strategy 4 if you own a Henrico home with room to borrow against.
Use a NoTouch Credit Pull soft pull with Duane Buziak at Short Pump Mortgage by Duane Buziak before applying anywhere else, so your score stays intact while the options are compared. 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.