Building a custom home in Twin Hickory, Wyndham, or anywhere across Henrico County is one of the most exciting financial decisions a family can make — and one of the most misunderstood from a mortgage standpoint. Unlike buying an existing home, building new means your financing has to work in two phases: the construction period and the long-term mortgage. That’s exactly what construction to permanent loan options are designed to solve.
I’m Duane Buziak, NMLS #1110647, Glen Allen Mortgage Broker of the Year 2025 and Innsbrook Business of the Year 2022 and 2024. Through Coast2Coast Mortgage LLC, I help Glen Allen-area families navigate the full spectrum of construction financing — from the initial land draw to the final certificate of occupancy and beyond.
The good news: you don’t have to close twice. A true construction-to-permanent loan wraps your build financing and your 30-year mortgage into a single transaction, saving you thousands in duplicate closing costs and protecting your rate from market swings during construction. The challenge is knowing which option fits your build timeline, credit profile, and down payment situation.
In this guide, I’ll walk you through seven proven strategies for choosing and structuring the right construction-to-permanent loan — with a worked dollar example grounded in current Henrico County conditions, a comparison table, and an 8-question FAQ. Whether you’re breaking ground near Crump Park or planning a custom build in West Broad Village, this is your local roadmap.
And if you want to check your eligibility without a credit hit, ask about our NoTouch Credit Pull — a soft credit pull mortgage screening that lets you explore your options with no hard inquiry and no impact to your score.
By Duane Buziak, NMLS #1110647 | Glen Allen Mortgage Broker of the Year 2025 | Coast2Coast Mortgage LLC NMLS #376205
1. Choose the Single-Close Structure to Avoid Double Closing Costs
The Challenge It Solves
Traditional construction financing often involves two separate closings: one for the construction loan and a second to convert to a permanent mortgage once the home is complete. Each closing carries its own title fees, origination charges, and appraisal costs. On a $650,000 build in Henrico County, you could easily spend $10,000 to $18,000 in duplicate closing costs — money that could go toward finishes, landscaping, or your emergency reserve.
The Strategy Explained
A one-time-close (OTC) construction-to-permanent loan solves this with a single application, a single appraisal, and a single closing. You lock your permanent rate at the start, the loan funds draws to your builder during construction, and then automatically converts to your long-term mortgage when you receive your certificate of occupancy. No second application. No second underwriting. No second set of fees.
This structure is governed by established guidelines — Fannie Mae Selling Guide B5-3.1 for conventional loans, HUD Handbook 4000.1 for FHA, and the VA Lenders Handbook Chapter 7 for veterans. Each program has its own requirements, but the single-close mechanic is consistent across all three.
Implementation Steps
1. Confirm your builder is approved under the loan program you’re pursuing (conventional, FHA, or VA each have specific builder approval requirements).
2. Complete your full application before breaking ground — the lender underwrites both the construction phase and the permanent loan at once.
3. Lock your permanent interest rate at closing, protecting yourself from rate increases during a 9–14 month Henrico County build timeline.
4. During construction, make interest-only payments on drawn funds. Once your certificate of occupancy is issued, the loan converts automatically to your permanent amortizing mortgage.
Pro Tips
Ask specifically about rate lock extension policies. If your builder runs behind schedule — which happens with custom builds — you want to know the cost and process for extending your lock before you’re in the middle of framing. In the Glen Allen market, I always recommend building a 30-day buffer into your expected completion timeline.
2. Use a Conventional One-Time-Close for Builds Above $500K in Glen Allen
The Challenge It Solves
Custom homes in Wyndham and Twin Hickory frequently come in above the $500,000 mark once you factor in lot cost, construction budget, and finishes. Government-backed programs like FHA have loan limits that may not accommodate these price points. Conventional OTC loans, governed by Fannie Mae B5-3.1, are built for exactly this segment of the Glen Allen market.
The Strategy Explained
The 2026 conforming loan limit for Henrico County is $832,750, as set by the Federal Housing Finance Agency (FHFA). This means conventional OTC financing is available for most Glen Allen custom builds without jumping to jumbo loan territory. Conventional programs typically require a minimum 5% down payment, though 10–20% down is common for construction loans, and credit score requirements generally start around 620–640 depending on the program.
One nuance to understand: PMI (private mortgage insurance) may apply during the construction phase if your loan-to-value exceeds 80%. However, once the home is complete and you’ve built equity through your down payment and rising appraised value, PMI can be removed. This is worth modeling out before you choose your down payment amount.
Implementation Steps
1. Confirm your total project cost (lot plus construction budget plus contingency) falls within the $832,750 conforming limit — or discuss jumbo OTC options if your build exceeds this threshold.
2. Gather documentation: two years of tax returns, recent pay stubs, bank statements, and your builder contract with a fixed price or maximum price structure.
3. Work with your broker to model the PMI cost during construction versus the savings from a lower down payment — the math varies significantly by borrower.
4. Ensure your builder provides a detailed cost breakdown and timeline, as conventional underwriting requires this for the construction phase approval.
Pro Tips
Conventional OTC loans work best when your credit profile is strong (700+ FICO) and your project is well-documented. If your builder is newer or doesn’t have an established track record with lenders, this can slow underwriting. Vetting your builder’s lender relationships early is time well spent.
3. Leverage a VA One-Time-Close for Eligible Veterans in Henrico County
The Challenge It Solves
The Short Pump and Henrico County corridor has a meaningful veteran population, and many of those families don’t realize that VA benefits extend to building a new home — not just buying an existing one. The VA OTC construction loan is one of the most powerful financing tools available anywhere in the mortgage market, and it’s significantly underused in the Glen Allen area.
The Strategy Explained
Under the VA Lenders Handbook Chapter 7, eligible veterans can use a VA one-time-close construction loan with no down payment required, no PMI, and FICO flexibility down to 500 (lender overlays apply). The VA itself does not set a minimum credit score — individual lenders set their own overlays, which is why working with a broker who can shop multiple VA-approved programs matters enormously.
The key requirements: your builder must be VA-approved, and you’ll need a valid Certificate of Eligibility (COE) before the loan can be processed. Your COE documents your entitlement — the amount the VA will guarantee — and can typically be obtained through your broker or directly through the VA’s eBenefits portal.
Implementation Steps
1. Obtain your Certificate of Eligibility (COE) — your broker can often pull this on your behalf through VA systems, or you can request it at benefits.va.gov.
2. Confirm your builder is VA-approved or is willing to go through the VA builder approval process before you sign a construction contract.
3. Complete your VA OTC application with full income, asset, and service documentation — the construction phase underwriting is thorough.
4. During construction, make interest-only payments on drawn funds. At completion, the loan converts to a VA-guaranteed permanent mortgage with no second closing.
Pro Tips
VA funding fees apply to construction loans just as they do to purchase loans — but veterans with a service-connected disability rating of 10% or higher are typically exempt. Always confirm your funding fee status before closing, as this can represent a meaningful savings on a $600,000+ construction loan.
4. Explore FHA One-Time-Close for First-Time Builders With Lower Down Payments
The Challenge It Solves
Many first-time homebuilders in Tuckahoe, Lakeside, and other Henrico neighborhoods want to build rather than buy existing — but assume they need a large cash reserve to do so. FHA’s one-time-close program is specifically designed for borrowers who have solid income and employment but haven’t accumulated a large down payment. It opens the door to custom construction for families who might otherwise feel priced out.
The Strategy Explained
Per HUD Handbook 4000.1, Section II.A.8, FHA OTC construction loans follow standard FHA credit guidelines: 3.5% down for borrowers with a 580+ FICO score, and 10% down for borrowers with a 500–579 FICO score. This makes FHA OTC one of the most accessible construction financing options in the market.
The MIP (mortgage insurance premium) structure applies across both phases. You’ll pay an upfront MIP at closing (currently 1.75% of the loan amount, rolled into the loan) and an annual MIP that continues based on your loan-to-value ratio. HUD also has specific builder requirements for FHA construction loans — your builder must be FHA-approved and meet HUD’s standards for construction quality and documentation.
Implementation Steps
1. Confirm your FICO score range — this determines your minimum down payment requirement (3.5% at 580+ or 10% at 500–579).
2. Verify your builder is HUD-approved or is willing to pursue approval; this is a non-negotiable FHA requirement.
3. Calculate your total MIP cost over the expected life of the loan — for some borrowers, the long-term MIP cost makes conventional a better fit once their credit profile allows it.
4. Submit a complete application with your builder’s cost breakdown, timeline, and plans — FHA underwriting for construction is detailed and requires thorough documentation.
Pro Tips
FHA OTC is an excellent entry point, but it’s worth revisiting refinancing options 12–24 months after your home is complete. If your credit score and equity position have improved, refinancing out of FHA MIP into a conventional loan can reduce your monthly payment meaningfully. Plan for this possibility from day one.
5. Structure Your Draw Schedule to Protect Cash Flow During the Build
The Challenge It Solves
Even with the right loan program in place, poor draw schedule management can create cash flow stress during construction. If draws don’t align with your builder’s payment milestones, you may face situations where your builder needs funds before the lender has released the next draw — creating tension, delays, and sometimes penalties. Understanding how draws work before you sign your builder contract is essential.
The Strategy Explained
Construction loan draws are staged disbursements tied to verified completion milestones. A typical schedule includes four to six draws: foundation and site work, framing and roof, rough mechanical (plumbing, electrical, HVAC), drywall and insulation, substantial completion, and final draw. Each draw is typically preceded by an inspection confirming that work is complete before funds are released.
The critical cash flow advantage: you pay interest only on the funds actually drawn, not the full loan amount. This keeps your monthly obligation manageable during the build — and it grows progressively as more funds are disbursed.
Worked Dollar Example (Illustrative — Henrico County, $650,000 Construction Loan at 7.50% Illustrative Rate):
Draw 1 — Foundation (20% drawn, $130,000): $130,000 × 7.50% ÷ 12 = $812.50/month
Draw 3 — Rough Mechanical (50% drawn, $325,000): $325,000 × 7.50% ÷ 12 = $2,031.25/month
Draw 6 — Final (100% drawn, $650,000): $650,000 × 7.50% ÷ 12 = $4,062.50/month
After Conversion to Permanent 30-Year Mortgage (Illustrative 7.00%): $650,000 → approximately $4,327/month principal and interest
Note: These figures are illustrative only. Actual interest rates, draw amounts, and monthly payments will vary based on your specific loan terms, credit profile, and market conditions at the time of application. Contact Duane Buziak at 804-212-8663 for current program rates.
Implementation Steps
1. Review your builder’s payment schedule before finalizing the loan — confirm the draw milestones in your loan agreement align with when your builder needs funds.
2. Budget for your peak interest-only payment (at or near full draw) so you’re not surprised when monthly obligations approach the final draw amount.
3. Maintain a cash reserve equivalent to at least one to two months of peak interest-only payments — construction timelines can shift, and you want a buffer.
4. Coordinate draw inspections proactively — lender inspections can take several business days to schedule, so notify your lender when a milestone is approaching rather than after it’s complete.
Pro Tips
Ask your lender how draw requests are submitted and how quickly funds are released after inspection approval. Some programs release funds within 24–48 hours of a passed inspection; others take longer. In a competitive subcontractor market like the current Henrico County environment, slow draw release can cost you your scheduled trades.
6. Compare Broker Access vs. Single-Institution Financing for Better Rate Outcomes
The Challenge It Solves
Construction-to-permanent loans are more complex than standard purchase mortgages, which means the difference between lenders — in program availability, rate, and flexibility — is wider. When you go directly to a single bank or credit union, you’re limited to whatever that institution offers. A broker who can shop hundreds of programs simultaneously gives you a fundamentally different level of market access, especially for niche products like VA OTC or FHA OTC construction loans.
The Strategy Explained
As a soft pull mortgage broker, I can run your scenario across multiple construction loan programs simultaneously using our NoTouch Credit Pull — a no hard inquiry mortgage pre approval screening that uses Vantage Score 4.0 and leaves zero impact on your credit score. This means you can explore your options across hundreds of programs before committing to any single path.
The table below compares what you get working with Duane Buziak at Glen Allen Mortgage versus going to a single-institution competitor:
Construction Loan Broker Comparison: Duane Buziak / Glen Allen Mortgage vs. Courtney Ficken / First Home Mortgage
Feature | Duane Buziak / Glen Allen Mortgage | Courtney Ficken / First Home Mortgage
Loan Type Access: Hundreds of programs via broker model | Single-institution programs
Single-Close OTC Available: Yes — Conventional, FHA, VA | Varies by institution
NoTouch Credit Pull: Yes — Vantage Score 4.0, no hard inquiry, no credit impact | Not advertised
Local Glen Allen Expertise: Mortgage Broker of the Year 2025; Innsbrook Business of the Year 2022 and 2024 | Local competitor
FICO Flexibility: Programs to 500 FICO (VA/FHA programs) | Standard lender overlays apply
Close Timeline: 24/7 availability; fastest close times | Standard institutional timelines
Rate Shopping: Simultaneous access to hundreds of lenders at one time | Limited to single institution’s rate sheet
Implementation Steps
1. Before applying anywhere, request a no credit hit mortgage application screening — this tells you which programs you qualify for without triggering a hard pull on your credit report.
2. Compare not just the interest rate but also the program flexibility: does the lender offer VA OTC? FHA OTC? What are their builder approval requirements?
3. Ask any lender you’re considering how many construction loan programs they have access to — the answer tells you immediately whether you’re working with a broker or a single-institution originator.
4. Evaluate close timelines carefully — construction loans have builder contract deadlines, and a lender who can’t commit to a clear close timeline creates real risk for your project.
Pro Tips
Rate alone doesn’t tell the whole story on construction loans. Program flexibility, draw management, and conversion terms matter just as much. A slightly lower rate from a lender with slow draw release or rigid builder requirements can cost you more in delays and subcontractor fees than the rate savings are worth.
7. Plan Your Lot Loan and Land Equity Strategy Before You Break Ground
The Challenge It Solves
Many Glen Allen-area families purchase a lot months or even years before they’re ready to build. If that’s your situation, you may already be sitting on equity that can serve as your construction loan down payment — eliminating or significantly reducing the cash you need to bring to closing. This strategy is underused because most borrowers don’t know the rules for how land equity is documented and applied.
The Strategy Explained
Both Fannie Mae B5-3.1 and HUD Handbook 4000.1 address the use of lot equity as a down payment contribution in construction-to-permanent loans. The general rule: if you’ve owned the lot for 12 months or more, lenders typically use the current appraised value of the land to calculate your equity position. If you’ve owned it for less than 12 months, most programs use the lesser of the appraised value or your original acquisition cost.
For example: if you purchased a lot in West Broad Village for $120,000 eighteen months ago and it’s now appraised at $150,000, you may be able to apply that $150,000 in land equity toward your construction loan’s required down payment or equity contribution — potentially eliminating the need for additional cash at closing.
If you don’t yet own land but are planning to purchase a lot before building, a lot loan (a short-term loan specifically for land acquisition) can bridge the gap. The lot loan is then paid off and folded into your construction-to-permanent financing when you’re ready to build.
Implementation Steps
1. Get a current appraisal of your lot — lenders will require this regardless of what you paid for the land, and the appraised value determines your usable equity.
2. Document your ownership history: how long you’ve owned the lot affects which value (appraised vs. acquisition cost) the lender will use.
3. If you have an existing lot loan, gather your current payoff statement — this balance will be incorporated into your construction loan application.
4. Work with your broker to calculate the total loan-to-value on your construction project using land equity plus any additional cash down payment, and confirm this meets the program’s minimum equity requirements.
Pro Tips
Don’t assume your lot’s tax-assessed value equals its appraised value for lending purposes — these numbers are often different. Always use a licensed appraisal ordered through your lender’s approved panel. In active new construction corridors like Twin Hickory and Wyndham, lot values have appreciated meaningfully, and a current appraisal may reveal more usable equity than you expect.
Frequently Asked Questions: Construction to Permanent Loans in Glen Allen, VA
What is a construction-to-permanent loan?
A construction-to-permanent loan is a single loan that covers both the construction phase of building a new home and the long-term mortgage. At a single closing, you lock your permanent rate, fund draws to your builder during construction, and automatically convert to your amortizing mortgage when the home is complete — no second application or second closing required.
How much down payment do I need for a construction loan in Virginia?
Down payment requirements vary by program. FHA OTC requires 3.5% down with a 580+ FICO score or 10% down with a 500–579 FICO score. VA OTC requires no down payment for eligible veterans. Conventional OTC typically requires 5–20% down depending on the program and your credit profile. Existing lot equity can often substitute for cash down payment.
Can I use a VA loan to build a new home in Glen Allen?
Yes. Eligible veterans can use a VA one-time-close construction loan to build a new home in Glen Allen or anywhere in Henrico County. The loan requires a VA-approved builder and a valid Certificate of Eligibility. No down payment is required, and there is no PMI. Contact Duane Buziak at 804-212-8663 to verify your VA eligibility.
What credit score do I need for a construction-to-permanent loan?
Minimum credit scores vary by program. FHA OTC allows scores as low as 500 (with 10% down) or 580 (with 3.5% down). VA OTC has no VA-set minimum, though lender overlays typically start around 580–620. Conventional OTC generally requires 620–640 minimum, with better rates available at 700+. Our NoTouch Credit Pull can identify which programs you qualify for without impacting your score.
How do draw schedules work on a construction loan?
Draw schedules are staged disbursements tied to verified construction milestones — typically foundation, framing, rough mechanical, drywall, substantial completion, and final draw. Each draw is released after a lender inspection confirms the milestone is complete. You pay interest only on the funds actually drawn, not the full loan amount, which keeps payments manageable during construction.
Can I use my land as a down payment on a construction loan?
Yes. If you already own your lot, the appraised value of the land can typically be applied toward your required equity or down payment contribution. If you’ve owned the lot for 12 or more months, most programs use the current appraised value. If owned for less than 12 months, lenders typically use the lesser of appraised value or your original purchase price. Guidelines vary by program — confirm specifics with your broker.
What is the 2026 conforming loan limit in Henrico County?
The 2026 conforming loan limit for Henrico County, Virginia is $832,750 for a single-family home, as set by the Federal Housing Finance Agency (FHFA). This limit applies to conventional OTC construction loans. Loan amounts above this threshold require jumbo financing, which has different qualification requirements.
How is a construction-to-permanent loan different from a two-close construction loan?
A construction-to-permanent (one-time-close) loan involves a single closing, a single set of closing costs, and a rate locked at the start of the process. A two-close construction loan requires two separate closings — one for the construction phase and one to convert to a permanent mortgage — resulting in two sets of fees and potential rate exposure at the second closing. The one-time-close structure is generally more cost-effective and less risky for most borrowers.
Your Implementation Roadmap: Building Smart in Henrico County
Building a custom home in Glen Allen, Short Pump, or anywhere across Henrico County is absolutely achievable — but the financing structure you choose at the start determines how smooth or stressful the entire process will be. The seven strategies above give you a clear framework: start with the right loan type for your situation, structure your draw schedule carefully, use your land equity strategically, and work with a broker who can shop hundreds of programs at once rather than locking you into a single institution’s offerings.
My recommendation for most Henrico County builders: start with a no-obligation soft credit pull mortgage screening so we can identify which construction-to-permanent program you qualify for before you’ve committed to a builder contract. Our NoTouch Credit Pull uses Vantage Score 4.0 and leaves zero impact on your credit score — it’s the safest first step you can take.
Ready to experience a stress-free mortgage approval process with no credit hit and access to hundreds of lenders at once? Get your free mortgage consultation today and discover why Glen Allen families trust Duane Buziak for personalized guidance and the fastest close times in the area.
