What Are Florida Construction Loans?
A Florida construction loan is a short-term loan that helps pay for building a home.
Instead of giving you all the money at once like a regular home loan, the lender gives it to you in parts as the house is built.
Once the house is finished, you usually switch to a regular home loan.
It’s important to understand construction loan rates because they affect how much you’ll pay in total.
How to Get the Best Construction Loan Rates in Florida
Securing the best construction loan rates requires careful planning. Here are some strategies to get the lowest possible rate:
- Improve Your Credit Score – Aim for a score of 720+ to qualify for the best rates.
- Compare Multiple Lenders – Rates and fees vary, so shopping around is essential.
- Consider a Larger Down Payment – A higher down payment reduces lender risk and can lead to better rates.
- Choose the Right Loan Type – Fixed vs. variable rates impact long-term costs.
- Lock in a Rate Early – Some lenders allow borrowers to lock in an interest rate during the approval process.
How Do Construction Loan Rates Work?
Construction loan rates are different from regular home loan rates because they are short-term and can change over time. These loans help pay for building a home, and you only pay interest on the money used at each stage of construction.
Several things affect Florida construction loan rates:
- The economy – Interest rates change based on market conditions.
- Loan type – Some loans have fixed rates, while others change over time.
- Your credit score – A higher score can get you a lower rate.
- How much you borrow vs. home value – Borrowing less compared to the home’s value can get better terms.
- Your down payment – Many lenders ask for at least 20% down.
Because construction loans are riskier for lenders, they often have higher interest rates than regular home loans. But once the home is finished, you can switch to a regular mortgage with a lower rate.
Fixed vs. Variable Construction Loan Rates
When looking at construction loan rates, there are two main types: fixed and variable.
- Fixed-rate loans have the same interest rate the whole time. This means your payments won’t change, but the rate might be a little higher.
- Variable-rate loans start with a lower rate, but the rate can go up or down depending on the economy.
Which one is best for you depends on your budget, how much risk you're okay with, and whether you think rates will go up or down in the future.
Florida Construction Loan Requirements
To get a Florida construction loan, you need to meet certain lender requirements. These can vary, but most lenders look for:
- Good credit score – Usually 680 or higher.
- Stable income – You need to show proof you can afford the loan.
- Clear building plan – Lenders want to see a timeline, cost estimate, and approved contractor.
- Big down payment – Most lenders ask for 20%-25% down.
- Loan limits – You can usually borrow up to 80% of the home’s value.
Meeting these requirements can help you get better loan rates and increase your chances of approval.
One-Time Close vs. Two-Time Close Construction Loans
In Florida, you can choose between two types of construction loans: one-time close and two-time close.
- One-time close loans combine the construction loan and the regular home loan into one. You lock in the interest rate at the start, so it won’t change.
- Two-time close loans require two separate loans—one for construction and another for the final mortgage. This gives more flexibility but comes with extra closing costs and possible rate changes.
Knowing the difference can help you choose the best loan for your budget and goals.
FHA & VA Construction Loans in Florida
Government-backed loans make it easier for some borrowers to get a construction loan.
- FHA construction loans need a smaller down payment (as low as 3.5%) and have easier credit requirements. These are good for people who may not qualify for a regular loan.
- VA construction loans are for veterans and active military members. They offer zero down payment and lower interest rates, making homebuilding more affordable.
These loans help first-time buyers and military families get financing with fewer obstacles.
Florida Construction Loan Closing Costs and Fees
When you get a construction loan in Florida, you’re not just paying for the loan itself—you’ve got some extra costs to keep in mind.
Closing costs and fees can add up fast, so it’s important to know what to expect. Most lenders charge an origination fee just to process your loan.
You’ll also need to pay for an appraisal so the lender can estimate the final value of your home. Since the loan is paid out in stages, inspections happen throughout the build, and you’ll be responsible for those costs too.
Then there’s title insurance, which protects you in case there are any legal issues with the property.
Some lenders even require you to set aside money in an interest reserve account to cover payments while your home is being built.
These fees aren’t always obvious upfront, so before you commit to a loan, ask your lender for a full breakdown of all the costs.
How Construction Loan Draw Schedules Work
A construction loan doesn’t give you all the money at once. Instead, the lender gives it to you in small amounts as the house is built.
This is called a draw schedule. The first payment usually covers buying the land or preparing the site. More payments come as each part of the house is finished, like the foundation, walls, plumbing, and electrical work.
Before each payment, an inspector checks to make sure the work is done right. The last payment comes when the house is finished and ready to live in.
This helps make sure the money is used properly and keeps the project on track.
Florida Construction Loan FAQ
What is a construction loan?
A construction loan is money a bank gives you to build a house. Instead of getting all the money at once, the bank gives it to you in stages as the house is built.
How do construction loan rates work?
Construction loan rates are usually higher than regular home loan rates. You only pay interest on the money you’ve used so far, not the whole loan amount.
What credit score do I need for a construction loan?
Most lenders want you to have a credit score of at least 680, but some may require a higher score. A better credit score can help you get a lower interest rate.
Do I need a down payment for a construction loan?
Yes, most lenders want you to put down at least 20% of the total cost of building the home. Some government-backed loans, like VA loans, might let you put down less.
How long does a construction loan last?
Most construction loans last 6 to 18 months. After the house is built, you usually switch to a regular home loan with lower payments.
Can I get a construction loan with bad credit?
It’s harder, but not impossible. Some lenders offer loans to people with lower credit scores, but you may have to pay a higher interest rate or a bigger down payment.
What happens if my construction project costs more than expected?
If costs go up, you’ll have to pay the extra money yourself or ask the lender for a bigger loan, which isn’t always guaranteed. That’s why it’s important to budget carefully.
Do I need to hire a builder, or can I build the house myself?
Most lenders require you to hire a licensed builder. Some may allow you to build it yourself, but only if you have experience as a contractor.
What’s the difference between a construction loan and a regular home loan?
A regular home loan is for buying a finished house. A construction loan is for building a house, and the money is given out in stages instead of all at once.
Can I use a construction loan to buy land?
Yes, but some lenders require that you start building right away. If you only want to buy land and wait to build later, you might need a separate land loan.
How do I find the best construction loan rates?
The best way is to compare different lenders. Look at interest rates, fees, and loan terms. A higher credit score and bigger down payment can also help you get a better rate.
With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.
By Phil Ganz
Edited by Ryan Skerritt
