Who this is for
Construction-to-permanent (C-to-P) loans are for buyers building a new home — either with a production builder in a community or custom on a lot you own. The loan funds the construction draw schedule and then automatically converts to your permanent mortgage when the home is finished. One loan, one closing, one rate lock, one appraisal.
The alternative — a separate construction loan and then a separate permanent loan — means two closings, two sets of fees, and the risk that rates move against you between phases. C-to-P solves that.
How one-time-close C-to-P works
- Application + approval. Standard mortgage underwriting plus a builder review (the builder has to be approved). We need plans, specs, and a builder contract.
- Closing. One closing, before construction starts. You sign all the loan documents at this point. Rate is locked through completion plus a buffer (typically 9-12 months).
- Draw schedule. The lender disburses funds to the builder in stages as work completes — typically foundation, framing, mechanical rough-in, drywall, finish, completion. Each draw requires an inspection.
- Interest-only during construction. You only pay interest on the funds drawn so far, not the full loan amount. Payments grow as more is drawn.
- Conversion at completion. When the home is finished and the certificate of occupancy is issued, the loan automatically converts to your permanent mortgage at the locked rate. No second closing, no requalification, no second appraisal in most cases.
What you actually need
- Down payment / equity: Typically 5-20% on primary residences. If you own the lot already, the lot equity counts toward the down payment in most programs.
- Credit score: 680 minimum at most lenders, 720+ for the best pricing.
- DTI: 43-50% calculated against the future PITIA at the locked rate.
- Reserves: 6-12 months of post-completion PITIA in liquid reserves.
- Builder approval: The lender reviews the builder's license, financials, references, and prior projects. Most production builders in Florida are pre-approved with major C-to-P lenders. Custom builders may need a fresh review.
- Documentation: Standard mortgage docs (income, assets, credit) plus signed builder contract, plans, specs, and budget.
Why one-time-close beats two closings. Closing costs are paid once. Rate is locked once — protecting you from rate movement during 6-12 months of construction. Underwriting happens once — you don't requalify mid-build if your situation changes. And you can't end up "uninsurable" mid-construction the way you can with a separate construction loan.
Florida-specific notes
- New construction insurance is its own beast. During construction, you need a builder's risk policy (the builder usually carries this). At conversion, you need a homeowners policy ready to go. In Florida's insurance market, lining up the homeowners policy early is critical — some carriers won't commit to a property until it's nearly complete.
- Hurricane rebuild zones add scrutiny. If you're building in a recently impacted area, both the lender and the insurer ask more questions. Wind mitigation features (impact glass, hurricane straps, elevation above flood zones) become part of the cost-benefit calculation.
- Permitting timelines vary wildly. Cape Coral and Naples have streamlined production-builder permitting. Custom builds in coastal flood zones can take 6+ months just for permits. Build the timeline into your rate lock — most C-to-P locks include extensions, but they cost something if you blow past them.
- Production builders often have preferred-lender incentives. Builders sometimes offer closing-cost credits if you use their preferred lender. Sometimes that math beats shopping the market; sometimes the rate premium they're charging exceeds the credit. We model both.
- Builder bankruptcy / failure protection. Florida has seen a few builder failures. C-to-P programs through reputable lenders include protections — funds released only against verified completion, ability to substitute a builder mid-project in extreme cases. Worth understanding before you commit.
Common construction scenarios
Production Builder
Lennar, DR Horton, Pulte, etc.
Buying a spec or to-be-built home in a community. Builder is pre-approved. Closing in 30-45 days from contract to construction start. Build typically 4-7 months.
Custom on Owned Lot
You own the land, custom builder
Lot equity counts toward down payment. Builder needs review. Build timeline 9-15 months typical. Rate lock with buffer is critical here.
Lot + Build Combo
Buying lot and building together
Some C-to-P programs include lot acquisition in the same loan. Otherwise, two-step: cash-buy the lot, then C-to-P with lot equity as down payment.
Tear-Down + Rebuild
Older home, demo, build new
You own a tear-down property. C-to-P funds the demolition and new build. Existing home equity counts toward equity in the new structure. Common in older Florida coastal neighborhoods.
When C-to-P isn't the right tool
- You're buying an already-built spec home from a builder — that's a regular purchase mortgage. Conventional, FHA, VA, or jumbo depending on price.
- Major renovation of existing home — look at FHA 203k or HomeStyle Renovation, which finance the purchase + renovation in one loan but on an existing home, not new construction.
- Builder isn't approvable — some custom builders don't have the financials or licensing track record to pass review. In that case, a separate construction loan from a local bank may be the only path.
FAQ
What happens if construction takes longer than expected?
Most C-to-P loans build in a 9-12 month construction period with extension options (typically 1-3 month extensions, sometimes at a small cost). If construction blows past all extensions, the loan can convert as-is or be re-locked at current market rates. We build buffer into the lock from day one.
Can I make changes to the plans during construction?
Yes, with documentation. Change orders are signed by you and the builder, the cost gets reviewed by the lender, and the budget updates accordingly. Significant changes (bigger square footage, higher price) may require fresh underwriting. Cosmetic upgrades are usually straightforward.
Do I pay full mortgage payments during construction?
No — only interest on the funds drawn so far. Early in construction (foundation, framing) the payment is small. By drywall and finish, most of the loan is drawn and the payment is closer to the final amount. The full P&I payment starts once the loan converts to permanent.
What's the difference between C-to-P and a "construction loan"?
A pure construction loan is short-term (typically 12 months), interest-only, and pays off at completion — meaning you have to take out a separate permanent loan, which means a second closing, second underwriting, second appraisal. C-to-P combines both into one loan with one closing. Almost always better for a homeowner-occupant.
Can I use VA for new construction?
Yes — VA construction loans exist. Fewer lenders offer them, the build time and inspections are stricter, but the 0% down advantage carries through. For VA-eligible buyers building, this is often the best play. We work with VA construction lenders directly.