A mortgage for a new construction home isn’t the same product as the loan you’d use to buy an existing house. The draw schedule, appraisal timing, and rate-lock rules all work differently, and getting this wrong can delay your closing by months. This article walks through how construction financing works, the loan types available to Henrico buyers, what the timeline looks like from lot to move-in day, and a real dollar example so you know what to budget.
Written by Duane Buziak, NMLS #1110647 | Coast2Coast Mortgage LLC NMLS #376205
Why New Construction Mortgages Work Differently Than Resale Loans
Buying an existing home in Tuckahoe or along the River Road corridor means the appraiser walks through a finished structure and compares it to recent sales nearby. A new construction mortgage works from a different set of facts. The appraisal is based on builder plans, specifications, and comparable new-build sales, which can get complicated in a neighborhood where most recent transactions were resale homes rather than ground-up construction. If comparable new builds are scarce, the appraised value can come in below the contract price, and that gap becomes the buyer’s problem unless it’s addressed before closing.
Disbursement is the other major difference. On a resale purchase, the full loan amount funds at closing and goes to the seller. On a construction loan, money is released in draws tied to specific milestones: foundation, framing, rough mechanicals, drywall, and final completion. Each draw usually requires an inspection before the builder gets paid, which protects the buyer and the broker from paying for work that hasn’t happened yet, but it also means the schedule depends on inspections happening on time.
Rate locks need more attention here too. A resale purchase typically locks for 30 to 60 days. A construction loan needs a lock that covers the entire build period, commonly six to twelve months depending on the scope of the project. Locking too short means you’re exposed to rate movement or extension fees right when you need certainty most. This is one of the most common mistakes Henrico buyers make: they assume the pre-approval they got for a resale search will simply carry over to a build, without checking whether the lock term matches the builder’s projected timeline. A broker who structures the lock around the actual construction schedule, rather than a generic default term, saves buyers from scrambling for a rate extension in month nine of a ten-month build.
One-Time-Close vs. Two-Time-Close Construction Loans in Henrico County
Construction financing generally comes in two structures, and the difference matters for both cost and risk. A one-time-close, also called construction-to-permanent, combines the construction loan and the eventual mortgage into a single closing. You qualify once, sign once, and the loan converts automatically to permanent financing when the home is complete. This avoids a second round of closing costs and a second credit pull, and it locks your rate structure in from the start rather than leaving you exposed to a market shift between phases.
A two-time-close loan splits the process into two separate transactions. You close on a short-term construction loan first, then apply and requalify for a permanent mortgage once the home is finished. That means two appraisals, two sets of closing costs, and two credit and income reviews. If your financial picture changes during the build, or if rates move against you, the second closing can look very different from what you expected at the start. For growth areas like Wyndham and Twin Hickory, where build timelines can stretch with permitting and material availability, that gap between closings is a real risk.
How you access these programs also matters. A builder’s in-house or preferred lender typically offers one construction program, built around their own underwriting preferences. A mortgage broker works with a wide range of wholesale construction-loan programs and can match the structure to your specific project and timeline instead of fitting you into whichever product the builder’s partner happens to sell.
| Feature | Duane Buziak / Coast2Coast Mortgage (Broker) | Builder’s In-House or Preferred Lender | Why It Matters |
|---|---|---|---|
| Program access | Access to hundreds of wholesale construction-loan programs | Single in-house construction product | More programs means better odds of matching your down payment, credit profile, and timeline |
| Rate lock flexibility | Lock terms structured around the builder’s actual schedule | Standardized lock term regardless of project scope | A mismatched lock term forces costly extensions mid-build |
| Closing structure | One-time-close options to avoid a second closing | Often defaults to two-time-close | Fewer closings means lower total cost and less rate exposure |
| Local market knowledge | Based in Glen Allen, familiar with Henrico permitting and growth corridors | Typically call-center based, not Henrico-specific | Local familiarity helps anticipate draw and inspection delays specific to the county |
From Lot Selection to Final Draw: The Build Timeline and Your Loan
Pre-qualification needs to happen before you sign a builder contract, not after. Builders in Short Pump and Twin Hickory often require proof of financing capacity before they’ll hold a lot for you, and a generic resale pre-approval usually won’t satisfy that requirement because it doesn’t address construction draws or interim interest. A credit-safe pre-qualification that accounts for the construction loan structure gives you a number to work with before you’re emotionally attached to a specific lot.
Once the loan is in place and the build starts, each phase of construction triggers an inspection before the corresponding draw is released to the builder. Foundation, framing, mechanicals, drywall, and final completion each have their own checkpoint. Delays are common and rarely dramatic on their own: a rain-delayed foundation pour, a permitting backlog through Henrico County’s building inspections office, a subcontractor scheduling conflict. Any of these can push a draw back by a week or two, and several small delays stacked together can add a month or more to the overall timeline. This is exactly why the rate lock needs cushion built in from the start.
The final step is conversion. Once the home reaches certificate-of-occupancy status, the lender orders a final review to confirm the completed home matches the appraised plans and specifications. If everything lines up, the construction loan converts to permanent financing, using the final appraised value and the actual amount drawn, not the original construction estimate. This is the point where your ongoing mortgage payment is finally set, so it pays to keep documentation of any change orders or upgrades made during the build, since those affect the final appraisal.
A Worked Example: Financing a $650,000 New Build in Wyndham
Suppose a Henrico buyer is building in Wyndham on a lot priced at $120,000, with a construction budget of $530,000 for the home itself. Total project cost comes to $650,000. With 10% down, that’s $65,000 out of pocket, leaving a financed amount of $585,000.
During the build, the buyer isn’t paying interest on the full $585,000 from day one. Interim construction interest is charged only on the funds actually drawn as each phase completes. If $150,000 has been drawn by month three for the foundation, framing, and initial mechanicals, interest that month is calculated on $150,000, not the full loan amount. This is one of the most misunderstood parts of construction financing: buyers often assume their carrying costs during the build will resemble a full mortgage payment, when in practice the interest-only structure on partial draws keeps monthly costs considerably lower until the home is complete and fully drawn.
When the home reaches certificate of occupancy and the loan converts to a permanent conventional mortgage, the rate and payment are based on the final appraised value and the actual amount financed, not the original construction estimate from month one. If the final appraisal comes in at $650,000 and the loan converts at $585,000 financed, a conventional 30-year rate around 6.5% (illustrative, not a quoted rate) would put principal and interest near $3,698 per month. That’s the number the buyer budgets against going forward, not the interim interest-only payment they were making during construction. Because conventional cash-out refinancing later would max out at 90% LTV, buyers who anticipate wanting to pull equity out after the build should factor that ceiling into their long-term plan from the start.
The 2026 conforming loan limit from the Federal Housing Finance Agency sits at $806,500 in most areas, which comfortably covers a project like this one without moving into jumbo territory. Buyers building larger homes in higher-cost pockets of the county should confirm where their total project cost lands relative to that limit before assuming standard conventional terms apply.
Frequently Asked Questions About New Construction Mortgages
What credit score do I need for a new construction mortgage? Most construction-to-permanent programs look for scores similar to standard conventional or government-backed purchase loans, generally in the mid-600s or higher, though exact thresholds vary by program and down payment.
Can I use a VA loan for new construction? Yes, VA-backed construction financing is available, and VA loans allow up to 100% LTV on cash-out refinances after the build converts to a permanent mortgage, which is notably more flexible than the 90% LTV ceiling on conventional cash-out.
How does the down payment differ from a resale purchase? The down payment is calculated against total project cost, meaning lot price plus construction budget, rather than just a home’s purchase price, so buyers should budget based on the combined figure.
What happens if construction costs run over budget? Overruns typically require the buyer to cover the difference out of pocket or, in some cases, request a loan modification before the next draw, which is why a realistic construction budget and contingency reserve matter from the start.
How long does a construction loan take to close? Initial closing on a one-time-close loan can take three to six weeks similar to a standard purchase, while the full build-to-conversion timeline commonly runs six to twelve months depending on the project.
Can I lock a rate before the home is built? Yes, and most construction-to-permanent programs allow a lock at the start of construction that carries through the build period, though the lock term needs to match the builder’s realistic schedule.
What inspections are required during the build? Draw inspections at foundation, framing, mechanicals, drywall, and final completion are standard, in addition to any county-level building inspections required through Henrico County’s permitting process.
What documents does the builder need to provide the lender? The lender typically needs the builder’s contract, detailed cost breakdown, plans and specifications, builder license and insurance information, and a draw schedule before construction funding begins.
Locking In Financing Before You Sign With a Builder
Construction financing has more moving parts than a standard purchase loan: appraisal timing, draw schedules, interim interest, and a rate lock that has to survive the entire build. The single best way to avoid delays is to get pre-qualified before you sign a builder contract, not after, so you know your real financing capacity and lock structure walking into that first conversation about a lot in Wyndham, Twin Hickory, or anywhere else in Henrico County.
Your dream home in Henrico County is closer than you think. Discover exactly what you can afford with our credit-safe pre-qualification process that protects your score while unlocking your options. Get pre-qualified today and take the first step toward homeownership with a local mortgage expert who understands your community.