How to Finance Building a House in 2026, Step by Step

Financing a new build comes down to seven steps: price the whole project, choose one closing or two, pick the program that fits, plan your cash, get your builder approved, build in draws, then convert to your permanent mortgage. As of October 2026, we can finance a build with one closing three ways through our lending partners. A conventional one-time close loan goes up to the conforming loan limit. Our VA one-time close offers up to 100% financing for eligible veterans with full entitlement, on loans up to our lending partner's $4 million program maximum. And a construction HELOC, a home equity line of credit that serves as the main loan on the property, is offered on a limited basis.

Modern Home Lending is a mortgage broker licensed in Arizona, Colorado, Florida and Georgia. For the program terms side by side, including 2026 loan limits by county, see our construction loans page.

Step 1: How much does it cost to build, all in?

More than the lot and the house. Price these before you talk to a lender:

• The lot: the purchase price, or what you still owe on a lot you already own
• The construction contract with your builder
• A contingency: every one-time close budget includes 5% of construction costs as a cushion for overruns
• Construction-only costs a regular mortgage does not have, such as a project review, draw inspections, a final inspection and builder's risk insurance, which covers the house while it is being built
• Closing costs, which are extra on top of everything above

Already paid for permits, plans or special-order materials? On the one-time close loans, those can count toward your share of the cost when you document both the payment and where the money came from.

Step 2: Should you close once or twice?

Once, in most cases. A one-time close loan, also called a construction-to-permanent or single-close loan, is one loan for the whole project: the same loan that pays for the lot and the build becomes your permanent mortgage when the home is finished. A two-time close uses a short-term construction loan, then a separate mortgage at move-in.

The risk with two closings is timing: you qualify again at move-in, at whatever rates and guidelines exist then. Our conventional and VA one-time close loans both work this way.

Step 3: Which construction loan fits your build?

It depends on who you are, what you are building and how much you can put in.

• Conventional one-time close: the default for most builds that fit under your county's conforming loan limit ($832,750 for a 1-unit home in most areas for 2026). It also covers second homes and rentals.
• VA one-time close: for eligible veterans and service members building a home they will live in, on loans up to $4,000,000 (our lending partner's program maximum), with no down payment for borrowers with full entitlement when the appraisal supports the total cost.
• Construction HELOC: a first-lien home equity line of credit for building, offered on a limited basis as of October 2026. It tends to fit when you own your land or can put more money down, especially on a larger build or a 1-unit second home.

Unlike a typical HELOC, the construction HELOC is the main loan on the property, not a second mortgage behind another loan. Because the line comes from a credit union, you become a member as part of the application. Program details for all three are on our construction loans page.

Step 4: How much cash will you need?

Your down payment depends on the program. Eligible veterans with full entitlement can put nothing down on a VA one-time close when the appraisal supports the total cost. The conventional one-time close and the construction HELOC need a down payment or equity in land you already own.

Each program caps the loan at a percentage of the home's value, called loan-to-value (LTV). The rest is your down payment, or equity in land you already own.

For example, take a 1-unit primary home outside Florida. The lot costs $150,000 and the build costs $550,000 (the construction contract plus a 5% contingency, which the one-time close loans require), for $700,000 in total, and the finished home appraises at $700,000.

In Florida, the construction HELOC tops out at 80%, so the same example would allow up to $560,000. The VA figure does not include the VA funding fee, a one-time fee paid to VA, which applies unless you are exempt.

Own the lot already? On the conventional option, the loan is then based on the appraised value of the finished home and land, so your land equity counts toward the down payment. If you own that $150,000 lot free and clear, a $550,000 loan for the build is about 79% of the $700,000 value. Your land covers the other 21%, well past the 5% minimum. On the VA one-time close, the loan covers the build plus anything you still owe on the lot, and equity in land you own can lower the VA funding fee. On the one-time close loans, land equity cannot pay your closing costs.

Two more cash items to plan for. On VA, only the funding fee can be added to the loan, so closing costs are paid at closing unless your builder offers credits. And if you own a home now, you qualify with your current mortgage payment and the new loan together, unless you sell before closing. Our guide to buying a new home before selling your current one covers your options.

These figures are illustrations, not quotes or approvals. Your numbers depend on the appraisal, your credit and income, and program guidelines.

Step 5: What does your builder need for a construction loan?

For the one-time close loans, your builder goes through a review by our lending partner before closing:

• A builder questionnaire
• A state contractor license
• Workers' compensation insurance, or a statement of exemption
• A W-9 and a copy of a driver's license

On VA loans, your builder also provides the one-year builder warranty VA requires. The project gets its own review: the signed construction contract, the budget, the plans and specs, and permits if any work has already started. An appraiser then values the home as it will be built, based on the plans.

A builder our lending partner approved within the last 12 months can often be reused with current insurance and license documents. Building it yourself? Owner-builders can be eligible on the conventional option for a primary residence if they pass the same review, including a state contractor license. Owner-builder projects are not eligible on the VA one-time close.

Step 6: How do draws work during the build?

On the one-time close loans, the money goes out in stages, called draws, instead of one lump sum. At closing, the lot is bought or any lot loan is paid off, and a first draw of up to 10% of the build cost can be set aside to get your builder started. Before the first draw, you and your builder sign the lending partner's agreement on how draws are paid. From there, the builder requests each draw and an inspector confirms the work before money is released.

On the conventional option you make interest-only payments on the funds drawn so far. On the VA one-time close, an optional interest reserve can pay construction-period interest from loan funds built into the budget; without one, you make interest-only payments.

If the contingency goes unused, it pays down your loan balance. If costs run past it, you may need to cover the difference, so a realistic budget matters.

The construction HELOC works differently, and we will walk you through its draw process when we quote it.

Step 7: What happens to the loan when the house is finished?

On the one-time close loans, the builder requests a final inspection when the house is done. The appraiser confirms the home was built to plan, and the builder provides the certificate of occupancy. You then sign an agreement that converts the loan to your permanent mortgage, the builder gets the final draw, and your payments change to principal and interest.

If rates have dropped enough since you closed, you may be able to float down to a lower rate at conversion. If they have risen, your rate does not go up when the loan converts. The build window is 11 months plus a month to convert, and the conversion agreement has to be signed within 12 months of closing. If it is not signed by then, you have to qualify again with updated income, asset and credit documents and a new appraisal.

Common questions about planning a build

What are the downsides of a construction loan?

More paperwork and less room for error than a regular mortgage. On the one-time close loans, your builder and project need approval before closing, the budget must include a 5% contingency, there are construction-only costs such as draw inspections, and the build has to finish within 11 months. If costs run past the contingency, you may need to cover the difference.

What if construction costs more than planned?

The 5% contingency built into every one-time close budget absorbs smaller overruns, and any unused amount pays down your loan balance. If costs run past the contingency, you may need to pay the difference out of pocket, so get a detailed budget from your builder before you apply.

Can you buy land and build a house with one loan?

Yes. A conventional or VA one-time close construction loan can buy the lot at closing, or pay off a lot loan you already have, and fund the build in the same loan. The construction HELOC can also pay for a lot purchase or payoff along with the build.

Is a construction HELOC the same as a regular HELOC?

No. A regular HELOC usually sits behind the mortgage on a home you already own. The construction HELOC is a first lien on the lot and the home you are building, it is limited to project costs such as the lot, construction, permits and inspections, and it cannot be used to pay off other debts.

See which construction loan fits your build

Every build is different, so we compare all three options against your lot, budget and timeline before you choose.

Program information was checked in October 2026 and can change. Loan limits shown are FHFA's 2026 figures.

Programs, rates, and terms are subject to change without notice. This is not a commitment to lend. All loans are subject to credit approval and program guidelines.