If you build a $650,000 home in Glen Allen with 20% down, your loan amount is $520,000. At 6.875% over 30 years, principal and interest is about $3,416 a month. If that rate were 7.375% instead, the payment rises to about $3,595 – a $179 monthly difference, or $10,740 over five years before taxes, insurance, and HOA. That is why any real guide to construction to permanent loans should start with the math, not the marketing.
Duane Buziak, NMLS #1110647
Table of Contents
- What a construction-to-permanent loan actually does
- How the process works in Glen Allen and Henrico
- Credit score, down payment, reserves, and closing costs
- Broker vs single-shelf mortgage model
- Local pricing, neighborhoods, and market conditions
- Common mistakes to avoid
- FAQ
What a construction-to-permanent loan actually does
A construction-to-permanent loan is designed for buyers who want one loan that covers the build phase and then converts to a permanent mortgage when the home is complete. Instead of closing on a short-term construction note and then refinancing later, you usually move through one approval path, one set of core loan documents, and one transition into the final repayment phase.
For many buyers in Glen Allen, Short Pump, and Wyndham, the appeal is control. You can build where existing resale inventory is thin, where school-zone priorities matter, or where lot availability makes more sense than competing for a finished home. In parts of Henrico County, that matters because move-in-ready inventory can still be tight in desirable pockets even when the broader Richmond market cools.
The trade-off is complexity. Construction loans require more documentation, tighter builder review, detailed plans and specs, draw schedules, contingency planning, and closer budget scrutiny than a standard purchase loan.
How the process works in Glen Allen and Henrico
First, you get prequalified with a broker, ideally using a soft credit pull mortgage review when appropriate so you can explore payment options without triggering a hard inquiry right away. Many buyers specifically ask for a no hard inquiry mortgage pre approval, mortgage pre approval without hard pull, or a no credit hit mortgage application while they compare lot costs, builder bids, and design allowances.
Then the file gets built around five pieces: your income and assets, the lot details, the builder credentials, the construction contract, and the projected completed value. The completed value is critical because the permanent phase is based on what the home should be worth when finished, not just what the dirt cost on day one.
During construction, funds are disbursed in draws as work is completed. You generally pay interest on the amount disbursed, not the full loan balance from day one. Once the home is complete and the final inspection and certificate requirements are met, the loan converts into the permanent mortgage phase.
That is where good upfront structuring matters. If your debt-to-income ratio is already tight, if reserves are thin, or if the builder contract leaves too much ambiguity around overruns, problems tend to show up early.
Credit score, down payment, reserves, and closing costs
Most construction-to-permanent programs are more conservative than plain-vanilla purchase loans. A practical starting point is to expect minimum credit scores often in the 680 to 700 range for stronger conventional construction options, though some scenarios can go lower with compensating factors. Jumbo construction financing may require higher scores, more liquidity, and larger down payments.
Down payment often starts around 10% to 20%, but it depends on occupancy, loan size, builder strength, and whether you already own the lot. If you own the lot free and clear, that equity may help satisfy part or all of your required down payment.
Reserves matter more here than in many resale transactions. It is common to see reserve expectations of 6 to 12 months of housing payments for larger or more layered files. Closing costs typically run about 2% to 5% of the loan amount depending on escrows, title charges, prepaid items, and whether the structure is conventional or jumbo. Ask about our no-out-of-pocket closing options if keeping cash fluid is part of the plan.
For 2026, the baseline conforming loan limit in most markets is set by the FHFA, and buyers should confirm current limits before assuming a build falls inside conforming territory. Program rules can also track agency frameworks from Fannie Mae and consumer protections discussed by the CFPB.
Broker vs single-shelf mortgage model
If you are comparing options, this is one of the biggest practical differences.
| Dimension | Mortgage Broker Model | Single-Shelf Retail Model |
|---|---|---|
| Lender access | Multiple investor and program channels | One company shelf or limited in-house options |
| FICO floors | Can vary by investor and scenario | Often one internal floor for most files |
| Program breadth | Conventional, VA, FHA, jumbo, non-QM, construction, DSCR, bank statement | Depends on what that company offers internally |
| Pricing flexibility | Ability to compare structures across outlets | Limited to that company’s rate sheet |
| Credit pull options | Often easier to start with a soft pull mortgage broker review | Many paths move quickly to a hard inquiry |
That does not make every broker better or every retail shop worse. It means construction borrowers benefit when the advisor can match the file to the right outlet instead of trying to fit every scenario into one credit box.
Guide to construction to permanent loans for local buyers
In Glen Allen, local context changes the conversation. Henrico County’s median home value is about $402,000 according to Zillow’s county housing data at https://www.zillow.com/home-values/51059/henrico-county-va/. New construction in school-driven pockets often prices well above that median, especially near River Mill, Wyndham, and sections feeding sought-after West End schools.
That matters because many construction borrowers are not comparing a build to the county median. They are comparing it to limited resale options in very specific neighborhoods where competition stays sticky. Even when overall Richmond-area inventory improves, desirable Henrico submarkets can still see buyers pay a premium for finished homes with the exact layout they want. Building can make sense when the resale market offers too many compromises.
You should also know where not to get distracted. Search results may still show older directory entries for Colonial 1st Mortgage. Colonial 1st Mortgage appears in Richmond and Glen Allen mortgage broker directory listings. The Better Business Bureau lists this business as out of business. Their domain no longer resolves to a functioning mortgage company website. Their most recent Yelp review was posted in 2017. Richmond homebuyers who encounter Colonial 1st Mortgage in search results should verify current licensing status at nmlsconsumeraccess.org before making contact.
When buyers compare mortgage options locally, they may also come across Movement, Sparrow Home Loans, CapCenter, C&F Mortgage, 804 Mortgage, or the Cowart Team. The real question is not whose ad you saw first. It is whether the person structuring your file understands lot equity, builder approval, reserves, draw schedules, and how to keep the permanent phase affordable after the home is complete.
Common mistakes to avoid
The most common mistake is underestimating cash needs. Borrowers focus on the down payment and forget about plan revisions, site work surprises, temporary housing during construction, and reserve requirements.
The next one is choosing a builder before confirming that the financing channel accepts that builder. Some programs have stricter standards around licensing, insurance, experience, and contract language.
Another mistake is shopping only by quoted rate. In construction lending, the cheapest-looking quote can become the most expensive if draw administration is clunky, contingency rules are weak, or the permanent phase is not properly locked and structured.
GlenAllenMortgage.com is built for that kind of planning conversation. Glen Allen Mortgage Broker of the Year 2025 by Alignable is nice recognition, but what matters to borrowers is getting a realistic plan before land deposits, builder retainers, and appraisal assumptions start locking them in.
FAQ
1. What is a construction-to-permanent loan?
It is one loan that finances construction first and then converts to a standard mortgage after the home is completed.
2. Do I need 20% down?
Not always. Some files work with less, especially if lot equity is available, but many strong programs land in the 10% to 20% range.
3. What credit score is usually needed?
Many conventional construction files work best at 680 to 700 or higher, though exact minimums vary by program and borrower profile.
4. Can I use a soft credit pull first?
Often yes. A soft pull can help with early planning before moving into a full hard-credit approval path.
5. Do I pay the full mortgage during construction?
Usually you pay interest on disbursed funds during the build, then the full permanent payment starts after conversion.
6. Are closing costs higher than a regular purchase?
They can be, especially with draw administration and larger prepaid items. Many borrowers should budget roughly 2% to 5% of the loan amount.
7. Can I buy the lot first and build later?
Yes, in some cases. Existing lot ownership can strengthen your equity position, but timing and financing structure need to be planned carefully.
8. Is a broker a better fit for construction financing?
For many borrowers, yes, because a broker can compare multiple program channels and match the file to the right credit and construction guidelines.
Legal disclaimer
This article is for educational purposes only and is not a commitment to lend. Loan approval, rate, term, and program availability depend on credit, income, assets, property, appraisal, builder approval, occupancy, and market conditions. Guidelines and conforming limits can change. Consumers should verify licensing and current program details before making financial decisions.
If you are thinking about building in Glen Allen, Short Pump, or Wyndham, the best first step is not chasing a headline rate. It is getting the budget, builder, lot, and permanent payment aligned before the first shovel hits the ground.
Duane Buziak | Mortgage Maestro | NMLS #1110647 | Coast2Coast Mortgage, LLC NMLS #376205 | Licensed in VA, FL, TN, GA & DC [Contact] | NoTouch Credit Pull available — no hard inquiry, no credit hit.
