Buying Land and Building in Florida: Lot Loan, Construction Loan and the Permanent Mortgage
Buying land and building Florida owners pursue takes up to three loans: one for the lot, one for construction and one to hold the finished home. A construction-to-permanent loan folds them into one.
Educational content only. This article is for informational purposes and does not constitute financial, legal, or lending advice. Loan programs, rates, and eligibility requirements change frequently. Consult a licensed mortgage professional before making any borrowing decision. Mortgage Capital | NMLS# 1859012 | Licensed in Florida.
Buying land and building Florida owners pursue can take three loans: a lot loan, a construction loan and the permanent mortgage.
A construction-to-permanent loan folds the last two into one closing. Our construction loan page and land loan page cover the pieces.
Step one: the lot
A lot loan finances raw or improved land.
Larger down payment, shorter term, higher rate than a mortgage.
See our guide to land loans for bad credit in Florida for the credit side.
Improved lots with utilities and road access finance more easily.
Raw acreage is hardest.
Due diligence on the lot
Zoning, setbacks, wetlands, flood zone, soil and access, plus utilities.
See our guide to flood insurance in Florida.
A survey and a title search.
See our guide to surveys and boundary disputes in Florida.
Well and septic feasibility where there is no municipal service.
Step two: the construction loan
A short-term loan that funds the build in draws as work completes.
See our guide to construction loan draw schedules in Florida.
Interest-only on the amount drawn.
The lender inspects before each draw.
Twelve to eighteen months is typical.
Step three: the permanent loan
At completion, the construction loan is paid off by a standard mortgage.
Two closings, two sets of Florida doc stamps, unless combined.
See our guide to Florida doc stamps and intangible tax.
Full underwriting again.
Rate risk between the two closings.
Construction-to-permanent
One closing that converts automatically at completion.
See our guide to construction-to-permanent loans in Florida.
One set of closing costs; the rate is locked or set at conversion.
The lot can be included or already owned.
The standard structure for owner-builders with a contractor.
Using the lot as equity
A lot you already own counts toward the down payment on the construction loan.
Its appraised value, not what you paid, at most lenders.
A paid-off lot can cover the whole down payment.
A lot loan is paid off at the construction closing.
Timing matters.
The builder
A licensed Florida general contractor with a fixed-price or cost-plus contract.
The Florida DBPR licence lookup verifies the licence.
Lenders review the builder's experience and references, plus financials.
Owner-builder loans exist but are rare and strict.
The contract is part of the loan application.
Plans and specs, plus budget
Complete plans, a specification list and a line-item budget.
The appraisal is on the completed home from the plans.
See our guide to low appraisals in Florida.
A contingency of 5 to 10 percent is required by most lenders.
Change orders need approval.
Florida building code
Wind loads, impact protection and elevation drive design in South Florida.
See our guide to hurricane shutters versus impact windows in Florida.
Miami-Dade and Broward have the strictest requirements.
Costs run above national averages.
The upside is a home that earns wind mitigation credits from day one.
Permits and timelines
Permitting in South Florida takes months.
See our guide to new construction mortgages in Florida.
The construction loan term must cover permitting plus building.
Extensions cost fees.
Start the permit before the loan clock if the lender allows.
Insurance during construction
Builder's risk coverage during the build.
See our guide to Florida homeowners insurance cost.
A homeowners policy at completion.
Flood coverage if the lot is in a zone.
The lender requires both at the right stages.
VA and FHA options
VA construction loans exist through a limited lender pool.
See our guide to VA construction loans in Florida.
FHA one-time close loans allow a low down payment.
Both require approved builders.
Fewer lenders, more paperwork, better terms.
USDA
USDA single-close construction loans in eligible areas.
See our guide to USDA property eligibility in Florida.
No down payment for eligible borrowers.
St. Lucie and Highlands, plus rural fringes qualify.
The builder must be approved.
Taxes
The lot is assessed as land until completion.
See our guide to property tax estimates for new buyers in Florida.
The first full assessment captures the finished home.
File for homestead after you move in.
The jump from land to improved value is large.
Cost overruns
The most common construction-loan failure.
The contingency covers the first overruns; beyond that, your cash.
See our guide to builder deposits in Florida.
A fixed-price contract limits exposure.
Material price swings still hit allowances.
Total cost and the appraisal
Lot price plus construction cost plus soft costs, compared to the appraised value of the finished home.
In South Florida the total often exceeds the appraisal on custom builds; the difference is your cash.
Lenders lend on the lower of cost and value.
A modest design in a strong neighbourhood appraises best.
Run the numbers with the lender before the plans are final.
Where to start
Complete the lot due diligence before you buy it.
Choose a builder and get plans and a budget the lender can appraise.
Then start a conversation and we will structure a construction-to-permanent loan around the lot.