One of the most common questions we hear from families considering a new home build is: “How does financing work when you’re building from scratch?” The answer is different from a traditional home purchase — but it’s simpler than most people expect, especially with the right lender and builder partnership.
Construction-to-Permanent Loans: The Most Common Option
The most popular financing option for new home construction is a construction-to-permanent loan (also called a one-time close or OTC loan). Here’s how it works:
You apply and get approved for the full loan amount before construction begins. During the construction phase, the lender makes a series of draws (disbursements) to the builder as each phase of construction is completed and inspected. You typically pay interest only on the amount drawn during construction. Once the home receives its certificate of occupancy, the loan automatically converts to a permanent mortgage — no second closing required.
The Draw Process
Construction draws are typically tied to construction milestones. A typical draw schedule might look like this:
- Draw 1: Foundation complete
- Draw 2: Framing complete
- Draw 3: Roof, windows, and exterior complete
- Draw 4: Rough mechanicals (electrical, plumbing, HVAC)
- Draw 5: Insulation and drywall
- Draw 6: Final — certificate of occupancy
At Presto Construct, we work with several South Florida lenders who are experienced with new construction draws, and we can provide referrals to qualified lenders who understand our process and timeline.
Down Payment and Qualification
Down payment requirements for construction loans vary by lender and loan type. Conventional construction loans typically require 10–20% down. FHA and VA options exist with lower down payments if you qualify. Some lenders will credit the value of your lot toward your down payment if you already own land.
What Lenders Look For
Beyond standard credit and income requirements, construction lenders will want to review your builder’s credentials — which is why working with a licensed, experienced builder like Presto Construct gives you a financing advantage. Lenders are comfortable with builders who have a track record, current licenses, insurance, and a detailed scope of work.
Our Builder-Lender Relationship
We have established relationships with local and regional lenders who specialize in South Florida new construction. We can provide introductions, help you understand the process, and coordinate the draw schedule so your build stays on track financially. Contact us to learn more.