Construction-to-Permanent Loans in Florida: One Closing, Two Phases

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.

A construction-to-permanent loan Florida borrowers use covers the build and the mortgage in a single closing. It converts to a standard loan once the house reaches completion.

The alternative is a construction loan followed by a separate refinance, which means two sets of closing costs and a second underwriting at whatever rates exist then. Our construction loan page covers both.

How the draw phase works

The lender releases funds in stages as the builder completes each phase and an inspector signs it off. You pay interest only on the funds already released.

That means early payments are small and grow toward completion, when the balance is highest.

Model the total interest during the build on the construction-to-permanent calculator. It is a real project cost and belongs in the budget.

Rate locks matter more here

Some lenders lock the permanent rate at the initial closing with an extended lock. It costs more up front and removes the risk of finishing into a higher-rate market.

Others float until completion, which is cheaper now and riskier later.

On an eleven-month Florida build, that choice can be worth more than the rate you negotiate. Ask about it explicitly.

Florida-specific budget lines

Impact fees, wind-load engineering and county permitting run heavier here than most first-time builders expect.

Coastal parcels may need elevation certificates and additional review, which adds both cost and time.

Insurance during the build is a builder's risk policy, not a homeowners policy, and it converts at completion. Confirm who carries it.

Qualifying for the permanent loan up front

The lender underwrites you once, for the loan you will hold after completion.

Income, credit and debt are all assessed at closing rather than at the end.

That protects you if your circumstances change during the build. It also means a job change mid-build can create problems.

What the appraisal is based on

Plans and specifications, not a finished house.

The appraiser values what you intend to build, and that figure caps the loan.

Material changes during construction can require a new appraisal.

Choosing a builder the lender will accept

Lenders review the builder's licence, insurance, financials and track record.

A builder who has not done lender-financed work before may not qualify.

Ask your lender for their builder requirements before you sign a construction contract.

See our construction loan page for the full process.

Costs to budget beyond the build

Impact fees, permitting and utility connections.

Wind-load engineering and, on coastal parcels, elevation certificates.

Builder's risk insurance during construction, converting to homeowners at completion.

Interest during the draw period, which grows as the balance does.

Contingency sizing

Ten percent is a common lender requirement. Fifteen is safer in Florida.

Weather delays and material pricing both bite here.

Overruns above the contingency come from your own funds.

Choosing between one close and two

One close fixes your permanent terms now and costs more up front.

Two closes are cheaper today and expose you to rates at completion.

On a build longer than nine months, the certainty usually justifies the cost.

Before you commit

Confirm your builder meets the lender's requirements.

Lock the plans and specifications before closing where you can.

Get a permitting timeline from the county rather than from the builder's estimate.

Who this suits

Buyers who want a specific lot and a specific plan.

Buyers with the patience for a twelve to eighteen month process.

Buyers with contingency funds beyond the lender's requirement.

If any of those is missing, a completed new-build purchase is usually the better route.

Questions for your lender

Do you lock the permanent rate at initial closing, and what does an extended lock cost?

How many draws are included, and what does each inspection cost?

What contingency do you require, and what happens if we exceed it?

Questions for your builder

Have you worked with lender-financed construction before?

What is your realistic permitting timeline for this county?

Who carries builder's risk insurance, and is it in the contract price?

A closing thought

Building gives you exactly what you want and asks for patience and contingency in return.

Where either is thin, a finished new-build purchase is the better route.

Next steps

Confirm your builder meets lender requirements, lock plans before closing. Get a county permitting timeline rather than a builder estimate.

A note on contingency

Ten percent is a common lender requirement. Fifteen is safer in Florida, where weather delays and material pricing both bite.

Worth repeating

Interest during the draw period grows as the balance does. It is a real project cost, not an afterthought.

Contingency is not optional

Lenders require a contingency reserve, commonly 10% or more. Overruns above it come out of pocket, since the loan amount fixed at closing.

Weather delays and material pricing make Florida overruns common enough that a thin contingency is a real risk.

If you already own the lot, that equity usually counts toward your down payment. See land loans if you are buying the parcel first. The construction loan calculator to size the project.

Fannie Mae publishes its construction-to-permanent requirements openly. The Fannie Mae HomeReady page covers the low-down-payment options that can pair with a build. Start with a pre-approval.