Program
Construction-to-permanent financing in Florida
Construction-to-permanent financing pays for a house that does not exist yet and then becomes the mortgage on it. The structure matters more than the headline rate: whether you close once or twice determines how many sets of closing costs you pay, how much rate risk you carry through the build, and whether you have to be underwritten again when the house is finished.
This may fit if
- You are building on a lot you already own or are acquiring as part of the same transaction
- You want one closing rather than a construction loan followed by a separate refinance
- You have a builder with a fixed-price contract, complete plans, and a realistic schedule
- You want the permanent terms settled before the first shovel goes in the ground
Look at alternatives if
- You are buying a finished spec home from a builder — that is an ordinary purchase transaction
- The work is repair or remodel of an existing house, which is renovation financing
- Your builder is unwilling to work within a draw schedule and an inspection process
- Your plans and budget are not settled — the loan is sized against the cost breakdown, so a moving budget is a moving loan
How it works
One closing or two, and the choice is structural
In a single-closing transaction the construction financing and the permanent mortgage close at the same time on the same set of documents, and the loan converts to permanent financing when the house is complete. In a two-closing structure the interim construction loan is its own transaction, later paid off by a separate permanent mortgage: a second closing, a second set of costs, and a second underwrite at whatever terms exist on that day. Fannie Mae and Freddie Mac both address single-close and two-close paths, and they are not interchangeable.
The loan is sized against cost or completed value, whichever is lower
Fannie Mae's single-closing guidance sets the property value used for loan-to-value at the lesser of the total acquisition cost — land plus construction — or the appraised value of the completed property. This is where borrowers are most often surprised: an expensive build in a modest neighbourhood is limited by the appraisal, and the difference between the two figures comes out of your own funds.
Money releases in draws against verified progress
You do not receive the loan amount at closing. The lender disburses in stages as work is completed and verified, typically with a title update at each draw to confirm no liens have attached. Interest is commonly charged only on what has actually been advanced, which is why Regulation Z carries a dedicated appendix for multiple-advance construction loans where the amounts or timing of advances are unknown at consummation — it also addresses how interest reserves are handled.
Conversion is the part to understand before you sign
On a single close, the loan modifies to its permanent terms when the house is finished. How the permanent rate is established, whether a float-down exists, and whether credit documents must be refreshed before conversion all vary by lender and program — Fannie Mae's guidance addresses requalification and credit document aging for exactly this reason. Ask what happens at conversion before construction starts, not after.
What moves the outcome
- Single close versus two close
- Drives closing costs, rate exposure through the build, and whether you are underwritten again at the end. It is the first question, not a detail to settle later.
- How the permanent rate is set
- Extended locks, float-downs, and rate-set-at-conversion are all real structures with different costs. Over a build measured in months rather than weeks, the difference between them is not small.
- Builder qualification
- Lenders review the builder's licence, insurance, financial capacity, and track record. A builder who cannot be approved ends the conversation regardless of how strong your own file is.
- Cost breakdown and contingency
- The line-item budget drives the draw schedule. Programs expect a contingency for overruns, and anything beyond it is generally funded by you rather than by the loan.
- Land equity
- If you already own the lot, its value can often count toward your equity. Fannie Mae's single-closing guidance treats a borrower who already owns the lot differently from one acquiring it, and how long you have owned it matters.
Run the numbers
Questions people actually ask
What do I pay each month during construction?
Commonly interest on the amount drawn to date, which rises as the build progresses. Whether an interest reserve is built into the loan instead varies by lender. Regulation Z's appendix for multiple-advance loans exists precisely because these payments cannot be stated exactly at closing, so expect an estimate with disclosed assumptions rather than a fixed schedule.
Can I act as my own general contractor?
Rarely, and it is entirely program- and lender-specific. Most programs expect a licensed general contractor with a documented track record, because the lender is releasing money against a schedule and needs someone accountable for it.
What happens if the build runs over budget?
The contingency absorbs part of it. Beyond that, overruns are generally yours to fund in cash — the loan amount was established at closing, and increasing it means re-underwriting if it is possible at all. This is the strongest practical argument for a fixed-price contract rather than a cost-plus one.
Can I build on a lot I already own free and clear?
Frequently yes, and the lot equity commonly serves as part or all of your down payment. Fannie Mae's single-closing guidance handles the already-owned-lot case as a refinance rather than a purchase, which changes the paperwork more than it changes the outcome.
Sources
Program rules change. These are the primary sources this page is written against and the ones we check before advising anyone.
- Selling Guide B5-3.1-02, Conversion of Construction-to-Permanent Financing: Single-Closing Transactions — Fannie Mae
- Construction to Permanent Mortgages — Freddie Mac
- Regulation Z Appendix D — Multiple-Advance Construction Loans — Consumer Financial Protection Bureau
Last reviewed 17 August 2026.
Talk it through with someone licensed
The page above is education. Your actual options depend on your full picture, and that takes a conversation. No credit pull, no application, no obligation.