Searching for the top construction loan lenders usually turns up a list of famous names, and that list rarely helps a Glen Allen landowner. Construction financing has draws, inspections, builder approval, and program rules that vary widely, so the best fit depends on your lot, your builder, and your timeline. There is no single winner. What works is a loan structure that suits your build and a broker who can shop many sources for it.
The seven strategies below are the ones I walk Twin Hickory, Wyndham, Innsbrook, and Short Pump clients through before they sign anything.
By Duane Buziak, NMLS #1110647
- 1. Choose the right construction loan structure
- 2. Use a broker who shops many sources
- 3. Start with a soft credit pull
- 4. Vet the builder rigorously
- 5. Understand program rules and the appraisal
- 6. Plan the draw schedule and interest-only payments
- 7. Compare rate lock and closing options
- Ten construction loan questions answered
1. Choose the right construction loan structure
Structure drives cost, rate risk, and flexibility, so settle it before you compare brokers. A rate quoted on one structure cannot be compared with a rate quoted on another.
- Single-close (construction-to-permanent): one application and one closing. The loan funds the build, then converts to a standard mortgage when the home is finished. You pay one set of closing costs.
- Two-close: a short-term construction loan first, then a separate permanent mortgage at completion. You qualify twice and pay closing costs twice, but you can shop the permanent loan at the end and the structure is easier to use if you may sell.
For example, imagine a Wyndham buyer who owns a lot, has a builder with a firm nine-month schedule, and plans to stay for years. Single-close fits that buyer, because it avoids a second closing and the risk that rates or underwriting rules change mid-build. If you want to see how the single-close product works in detail, review these construction to permanent loan options for Glen Allen homebuilders.
To put this into practice:
- Write down your expected build length, whether you own the lot free and clear, and whether you might sell within a few years.
- Ask each broker which structures they can actually offer for your situation.
- Request an estimate of total closing costs for each structure, not just the rate.
The common mistake is comparing a single-close rate with a two-close construction rate as though they were the same product. They are not: one includes the permanent financing and the other does not. Measure two things for every option: total projected closing costs and the number of closings you will go through.
2. Use a broker who shops many sources
Appetite for construction lending varies a great deal from one source to the next. Some programs want a spec home on a standard plan, others handle custom builds, and some will not touch a rural or irregular lot. A single bank sees only its own menu. Duane Buziak compares many sources at once, which is how a file that one source declines can still find a home with another.
Imagine a Short Pump borrower whose bank declines a custom build because of the plan complexity. A broker search turns up a program built for exactly that kind of project. The borrower did nothing differently except widen the search. It is the same logic behind choosing between mortgage lenders on more than brand name alone.
Putting it into practice:
- Ask Duane Buziak to compare multiple sources for your build.
- Request a side-by-side of rate, fees, and construction terms such as draw rules, inspection fees, and conversion terms.
- Get one quote from a local bank or credit union as a benchmark.
- Add a national name such as Rocket or Movement, or a local option such as Courtney Ficken at First Home Mortgage, if you want a wider spread to compare.
The mistake is treating the first quote, or a recognizable brand, as the whole market. Every name is one data point. Measure the number of comparable written quotes you collect and the spread in total cost between the highest and lowest. A wide spread tells you the search was worth doing.
3. Start with a soft credit pull
Construction decisions take weeks. You choose a builder, tweak plans, and price the lot, and repeated hard inquiries during that stretch can nudge your score. A soft credit pull mortgage review avoids that. Duane Buziak uses NoTouch Credit Pull to review your file without a hard inquiry, so you can learn where you stand and shop with no credit hit mortgage application at the early stage.
Imagine a Lakeside homeowner who spends several weeks picking between two builders. A soft review at the start shows the likely program fit and flags an outdated collection entry. By the time the owner is ready to commit, the report is clean and no inquiries have piled up. If your score needs work first, these strategies for bad credit mortgages are a useful companion.
To put it into practice:
- Request the soft pull review and ask what scoring model is being used.
- Dispute any report errors right away, since corrections take time.
- Hold off on new credit cards, car loans, or furniture financing.
- Authorize a full pull only when you are ready for underwriting.
The common mistake is assuming a soft pull equals final approval. It does not. It is a preliminary read, and approval still depends on full documentation, the builder, the plans, and the appraisal. Measure your score from the first review to underwriting, and count your hard inquiries. The ideal number before underwriting is zero.
4. Vet the builder rigorously
With a purchase, the underwriter reviews you and the house. With construction, they also review the builder, because the builder’s ability to finish determines whether the collateral ever exists. License status, financial health, insurance, and references can make or break approval.
Imagine a loan that stalls for two weeks because the builder’s insurance certificate was never sent. The borrower did nothing wrong, but the closing date slid and the lot taxes and interest kept accruing. Our Virginia construction loan timeline shows where those delays tend to hide.
How to avoid that:
- Verify the builder’s license class and status through the Virginia Department of Professional and Occupational Regulation and check for disciplinary history.
- Ask the builder for their approval package early: license, insurance certificates, financial statements, references, and recent project history.
- Get a fixed-price contract with detailed specifications and allowances, so the budget the underwriter sees is the budget you will live with.
- Confirm the permitting steps with Henrico County so the schedule is realistic.
The classic mistake is signing a contract with a builder before confirming that the loan program accepts that builder. If the builder is rejected, you may have to start over or lose a deposit. Ask Duane Buziak to check builder requirements first. The number to track is days from application to builder approval. If it drags, the missing document is almost always on the builder’s side, and finding it early saves the schedule.
5. Understand program rules and the appraisal
Conventional, FHA, and VA construction options differ on down payment, qualifying, builder requirements, and how the home is valued. Your project may fit one program far better than another. Before comparing offers, learn the main terms. An as-completed appraisal values the finished home based on plans and specifications, not the empty lot and not the contract price.
Land equity can change the picture. Imagine an owned lot in the Twin Hickory area worth $150,000 with no mortgage on it. Many programs let that equity count toward your down payment, which could cover much of the required contribution on a $550,000 build without cash from your savings. The specifics depend on the program and the lot’s paid-for status. If you are weighing government-backed options, this breakdown of conventional versus government-backed loans can help.
To put this into practice:
- Gather your lot deed, any survey, and the full plans and specifications.
- Ask for each program’s current requirements in writing.
- Check the official sources: HUD for FHA rules and VA home loan guidance for VA options. Rules change, so confirm as of 2026.
- Check the FHFA conforming loan limit for 2026, which is $832,750 for most of Virginia, including Henrico.
The common mistake is assuming the appraisal will match the contract price. If it comes in lower, you may owe the gap in cash or need to rework the plan. Measure the appraised value against the contract price, and the total cash required to close, before you commit.
6. Plan the draw schedule and interest-only payments
Many buyers assume they will pay a full mortgage payment while building. Usually you do not. Funds are released in inspected stages called draws, and during construction you typically pay interest-only on the amount drawn so far. That keeps early payments small, then raises them as the balance grows.
Here is an illustration with an assumed rate of 7.00% for the math only, not a quote. Imagine a $600,000 build. If the first draw is $60,000, the monthly interest is $60,000 × 0.07 ÷ 12, or about $350. By the final draw, with the full $600,000 outstanding, interest is $600,000 × 0.07 ÷ 12, or $3,500 a month. That is a tenfold jump over the build, and it does not include any rent or existing mortgage you are still paying. If your plan involves buying a new home before selling the old one, a bridge loan for a home purchase may help cover the overlap.
Putting it into practice:
- Get the draw schedule in writing, including inspection timing and how many days each release takes.
- Build a 5 to 10% contingency into your budget. On $600,000, that is $30,000 to $60,000.
- Route every change order through Duane Buziak so it is documented and does not stall a draw.
- Budget for your housing costs during the build, such as rent or an existing mortgage.
The mistake is underestimating interest carry and skipping the contingency. Weather, material delays, and upgrades all push costs and extend the interest period. Measure the budget variance at every draw and the total interest paid during construction. If variance grows early, address it before the last draws.
7. Compare rate lock and closing options
On a long build, the rate lock can matter as much as the rate. Lock length, extension fees, and float-down terms can change what the loan really costs. A short lock that expires before you finish means paying to extend it, or taking whatever the market offers.
For example, imagine two quotes on a 12-month build. One has a lower rate but a lock that expires at month nine, with an extension fee. If that fee were 0.25% on a $500,000 loan, it would be $1,250 for each extension. The other has a slightly higher rate but a longer lock priced up front. Depending on how the build runs, the second could be cheaper. Learning to read the Loan Estimate form makes these differences easy to spot.
How to compare them:
- Ask every broker for the same list: lock length, extension fees, float-down availability, and any conversion fee when the loan moves to permanent financing.
- Lay the answers side by side, with one row per broker and one column per term.
- Match each lock expiration to your builder’s schedule, then add a buffer for delays.
- Check a reference point such as the weekly Freddie Mac Primary Mortgage Market Survey, noting its date, so you know how a quote sits against the broader market.
The pitfall is choosing the lowest rate without checking the lock against the build timeline. Measure the effective total cost, including lock fees and any likely extension, against the expected completion date, not the rate alone.
Where to start, and what to leave for last
Do the first three things first: pick your structure, get a soft-pull pre-qualification, and vet your builder. Those decide which programs you can use and how fast the file moves. Compare rate locks last, once you know your real options and your realistic schedule. A great lock on the wrong structure is still the wrong loan.
If you are weighing a build in Short Pump, Innsbrook, Twin Hickory, or Wyndham, call Duane Buziak at Glen Allen Mortgage by Duane Buziak, 804-212-8663, or stop by 4860 Cox Rd, Glen Allen, VA 23060. Ready to experience stress-free mortgage approval 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.
