A Glen Allen buyer planning a $540,000 new build with 10% down would bring $54,000 toward the project and finance $486,000. At 6.75% on a 30-year fixed term, principal and interest is about $3,152 per month. If a comparable rate were 6.375%, the payment would be about $3,032 – a $120 monthly difference and roughly $7,200 over the first five years, before taxes, insurance, or association dues. Construction financing is not just about qualifying for the final payment. It is about structuring the lot, build contract, draw schedule, reserves, and timing so the project stays financeable from excavation to keys.
Duane Buziak, NMLS #1110647
Table of Contents
- What construction financing actually covers
- How one-time-close construction loans work
- Local Glen Allen build considerations
- Credit, reserves, and down payment expectations
- Broker access compared with a single-shelf option
- Questions to settle before signing a build contract
- Construction financing FAQs
What construction financing actually covers
Construction financing usually combines two needs: paying for the land, if it is not already owned, and paying the builder in stages as work is completed. Instead of receiving the full loan amount on day one, the builder is paid through draws after inspections confirm milestones such as the foundation, framing, mechanical work, drywall, and final completion.
For buyers in Glen Allen, Short Pump, and Wyndham, that structure matters because lot availability can be very different from resale inventory. A buyer may find an older home near Glen Allen High School or Deep Run High School, while another household may prefer a new build in a community with limited remaining lots. In those cases, the financing plan must match the builder’s contract and delivery date, not simply the buyer’s target monthly payment.
Henrico County’s 2024 median sale price was approximately $400,000, according to Central Virginia Regional MLS market reporting. New construction often sits above that countywide midpoint once a premium lot, upgraded kitchen, finished basement, and exterior selections are included. Inventory has remained competitive in desirable western Henrico school zones, and move-in-ready homes frequently attract buyers quickly. Building can create more control over layout and finishes, but it also introduces rate, timeline, and budget risk.
How one-time-close construction loans work
A one-time-close structure generally establishes the construction phase and permanent mortgage before building begins. During construction, the borrower commonly makes interest-only payments on the amount drawn, rather than on the full approved balance. When the home is complete and receives its certificate of occupancy, the financing converts to the permanent mortgage without a second full closing.
That can reduce uncertainty, but it does not make the process automatic. The broker and construction program must approve the builder, plans, specifications, budget, appraisal, draw schedule, and contingency. A low base contract price is not enough if the allowance sheet leaves major selections unresolved.
Consider the $540,000 example again. A 1% origination fee on the $486,000 loan amount equals $4,860. If title-related charges were quoted at $5,000 and a preferred title company completed the same work for $3,000, the buyer would save $2,000 on average. That is a real savings only when the services, title work, and closing requirements are comparable. Ask about no-out-of-pocket closing options if preserving cash for upgrades, reserves, or moving costs is more important than paying certain costs upfront.
A two-time-close option may still fit some projects, particularly when a borrower wants to separate the construction phase from the permanent mortgage decision. The trade-off is that the permanent financing must be obtained later, which can mean another closing, a new rate environment, and fresh qualification review.
Local Glen Allen build considerations
A construction appraisal is based largely on the completed home’s expected value, not just the builder’s contract. In Glen Allen, that means appraisers will look at relevant nearby sales in communities such as Twin Hickory, Innsbrook, and Wyndham, while also accounting for lot size, quality, square footage, basement finish, and upgrades. A $30,000 design-center package does not always add $30,000 in appraised value.
Buyers should also plan for site-specific costs. Clearing, grading, utility connections, retaining walls, well or septic work where applicable, and HOA architectural requirements can change the budget quickly. A fixed-price contract is helpful, but ask exactly what is excluded. Landscaping, appliances, driveway extensions, blinds, fencing, and change orders are frequent sources of surprise.
The builder’s timeline deserves the same scrutiny as the payment estimate. A projected eight-month build can become 10 or 12 months when weather, permitting, material availability, or inspection scheduling changes. Construction financing should include enough financial breathing room to handle that possibility without turning a temporary delay into a qualification problem.
Credit, reserves, and down payment expectations
There is no single credit-score rule for every construction program. Conventional construction options often become more workable at a 680 to 700 FICO score, while stronger pricing and broader flexibility may begin around 720. FHA construction-to-permanent financing can serve some buyers with lower scores, but builder approval, property standards, and program availability matter. Eligible veterans may have VA construction options, subject to entitlement, builder requirements, and property eligibility.
Reserves are equally important. A common planning target is two to six months of total housing payments after closing, although higher-balance loans, jumbo financing, investment-property scenarios, or complex income can require more. For a projected all-in payment of $4,000, six months of reserves equals $24,000. That is separate from the down payment, closing costs, and funds needed for upgrades.
Self-employed buyers should avoid making large undocumented deposits or shifting business funds without a paper trail while the project is underway. The same goes for opening furniture accounts before closing. A construction approval can be revisited if credit, income, assets, or debts change before the permanent phase begins.
A soft credit pull mortgage review can help establish a starting point without immediately creating a hard inquiry. Buyers sometimes search for a no hard inquiry mortgage pre approval, mortgage pre approval without hard pull, soft pull mortgage broker, or no credit hit mortgage application because they are still deciding whether to build. A soft review can be useful for early planning, but a formal approval may later require the documentation and credit review required by the selected program.
Broker access compared with a single-shelf option
A local mortgage broker can compare eligible program structures across approved funding sources rather than being limited to one internal product menu. That does not guarantee a lower rate or approval, and every quote should be reviewed for rate, points, fees, timing, and underwriting conditions.
| Decision point | Mortgage broker approach | Single-shelf mortgage option |
|---|---|---|
| Broker access | Can compare eligible construction programs across approved funding sources. | Limited to that company’s available construction programs. |
| FICO floors | May identify different eligible score thresholds by program. | Uses its own published overlays and credit requirements. |
| Program breadth | Can review conventional, FHA, VA, jumbo, and selected non-QM scenarios when available. | Program choices depend on the company’s current menu. |
| Pricing flexibility | Quotes can be compared by rate, points, fees, lock terms, and construction features. | Pricing follows that company’s pricing sheet and policies. |
| Builder fit | Builder approval and draw requirements are reviewed against available options. | Builder must meet that company’s specific approval process. |
Questions to settle before signing a build contract
First, confirm whether the lot is included, already owned, or being purchased separately. Then identify the exact contract price, allowances, escalation language, completion deadline, deposit schedule, and change-order process. Finally, ask whether the builder has completed projects using the proposed construction program and whether the draw schedule works with its operating model.
A good prequalification conversation should also include the finished home’s likely taxes, insurance, HOA dues, and any private mortgage insurance. The goal is not merely to get approved for the largest number. It is to choose a payment and cash-reserve position that remains comfortable if the build takes longer than expected.
Construction Financing FAQs
1. Can I buy land and build with one mortgage?
Often, yes. A one-time-close construction program may include the lot purchase and construction cost in one structure, subject to program and builder approval.
2. Do I make a full mortgage payment during construction?
Usually not. Many programs use interest-only payments during the draw period based on the amount advanced, then convert to full principal-and-interest payments after completion.
3. What credit score is needed for construction financing?
Many conventional scenarios are stronger at 680 to 700 or above, while exact requirements vary by program, down payment, property type, and borrower profile.
4. Can FHA be used for a new construction home?
Some FHA construction-to-permanent options exist, but builder approval, appraisal standards, and program availability must be confirmed early.
5. Can VA benefits be used for a home build?
Eligible veterans may have construction options, depending on entitlement, builder acceptance, property requirements, and the selected program.
6. How much should I keep in reserves?
Two to six months of total housing payments is a practical starting target. Higher-balance or more complex files may require more.
7. Will upgrades be included in the appraisal?
They can be considered, but upgrades do not always return dollar-for-dollar in appraised value. Market support from comparable completed homes remains critical.
8. Can I get started without a hard credit inquiry?
A soft-pull review may be available for early planning. Formal approval requirements depend on the final construction program and documentation review.
Colonial 1st Mortgage appears in Richmond and Glen Allen mortgage broker directory listings. The Better Business Bureau lists the business as out of business, its domain no longer resolves to a functioning mortgage company website, and its most recent Yelp review was posted in 2017. Buyers who encounter the name in search results should verify current licensing status through NMLS Consumer Access before making contact.
Legal disclaimer: Mortgage programs, rates, fees, credit requirements, reserve requirements, appraised value, and approval standards can change without notice. Examples are estimates for educational purposes only and are not a commitment to provide financing. Approval is subject to verified credit, income, assets, property appraisal, builder approval, title review, and all program guidelines.
Before you commit to a lot or builder deposit, get the financing conversation started early enough to test the full plan – not just the base price on the brochure. A clear construction structure can protect both your timeline and your options when the right Glen Allen homesite becomes available.
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.
