A land purchase and construction loan finances the lot and the house together, either as one one-time-close loan that converts to a permanent mortgage or as two separate loans. Which path fits depends on your credit, your down payment or equity, and whether you hold VA entitlement. One fact catches many buyers off guard: VA does not guarantee a loan for raw land alone, so a service member buying a lot in Stafford or Spotsylvania usually needs a different plan for the lot than for the build.
Construction products also vary far more from one source to the next than ordinary mortgages do. Many retail institutions limit or skip construction lending, which is why a broker with a wide product shelf matters here. You can compare structures with a soft credit pull mortgage step before any hard inquiry touches your score.
By Duane Buziak, NMLS #1110647
Three Loan Structures and the Draw Schedule Behind Them
Land and construction financing comes in three basic forms, and mixing them up is the source of most confusion.
- Raw land loan: finances only the lot. It carries no house, so the underwriting looks at the land’s value and your ability to repay, usually with a larger down payment than a standard mortgage.
- Construction-only loan: covers the build, with interest-only payments on the money drawn so far. When the house is finished, you pay it off with a separate permanent mortgage, which means qualifying and closing a second time.
- One-time-close construction-to-permanent loan: one application, one closing, and one set of closing costs. After construction, the loan converts to a standard mortgage without requalifying in many programs.
The draw schedule works the same way in all construction structures. The builder does not receive the full amount at closing. Funds release in stages, such as after the foundation, framing, rough-in, and final completion, and each release typically follows an inspection. During construction you generally pay interest only on the balance drawn to date, not on the full loan amount. That is why early payments are small and grow as the house goes up. For a deeper look at how a construction loan differs from a standard mortgage, compare the two side by side.
Local lot conditions shape the loan as much as the program does. Lots in Stafford, Spotsylvania, King George, and Caroline counties differ on whether they connect to public water and sewer or need a well and septic system. A lot needing a well and septic usually requires a passing soil evaluation and approved system design before the appraiser and the loan will move forward. Utility access, setbacks, and permitting steps are set by each county, so verify the current process with the building office in the county where the lot sits before you spend money on plans.
One misconception to clear up early: construction rates do not always match standard mortgage rates. Depending on the structure, the construction phase may be priced differently from the permanent loan, so ask for both numbers in writing.
Matching VA, USDA, FHA, Conventional, and Non-QM to a Build
VA
VA does not offer a standalone land loan. VA-guaranteed construction loans exist, but few brokers and institutions offer them, which is where independent access matters. Duane Buziak explains the VA-eligible paths that are actually available and what must be verified in each. Start with the VA home loan guidance and request your Certificate of Eligibility early through the VA COE page. The funding fee also applies and depends on down payment and prior use, so check the current table on the VA funding fee page. Military buyers can also review our Virginia military home loans guide for PCS and entitlement details.
USDA
USDA offers one-time-close construction options in eligible rural pockets, which can include parts of King George and Caroline counties. Eligibility turns on the property’s location and your household income, so check the address on the USDA Rural Development eligibility map and confirm the income limits in effect as of this publication date. Our USDA loan requirements in Virginia article walks through the eligibility rules in more detail.
FHA and conventional
FHA offers a one-time-close construction-to-permanent option, with rules in HUD Handbook 4000.1. As of this writing, FHA generally allows lower minimum down payments and more flexible credit than conventional construction loans, which tend to ask for stronger credit and a larger down payment. Both change with program updates and investor overlays, so treat any minimum as something to confirm at the time you apply.
Non-QM, bank statement, and jumbo
Self-employed buyers often show less on a tax return than they earn. Bank statement and other non-QM construction options can qualify income from deposits instead, and our guide to mortgage strategies for self-employed buyers explains how that works. Larger builds that exceed conforming limits may need jumbo construction financing. Retail banks often do not offer these products at all.
Closing on the Lot Before the House Is Financed
Buying the lot first, with a separate raw land loan, usually means a larger down payment and a higher rate than an owner-occupied mortgage. Land has no house to live in and is harder to resell, so the risk to the loan is higher. Terms vary widely by program and market, so get a quote for your specific lot rather than relying on a general figure.
Many buyers avoid a raw land loan entirely. Paying cash or tapping equity in a current home is a realistic path for a PCS seller leaving Quantico or Fort Belvoir. If you sell a home on the way out and carry proceeds forward, those funds can buy the lot outright and then count toward your equity position for the build loan. Land you already own free and clear can often serve as the down payment on the construction loan. If you need to bridge the gap between selling and building, see our overview of bridge loan options for Fredericksburg homebuyers.
Vetting the builder matters as much as the financing, because the loan depends on the builder’s paperwork. Look for:
- A Virginia contractor license in good standing, which you can check on the Virginia DPOR license lookup
- A fixed-price contract, or a clearly defined budget with allowances spelled out
- A draw schedule that matches the construction milestones
- Complete plans and specifications, which the appraiser uses to value the finished home
- Proof of insurance
The most common mistake is closing on the lot before confirming three things: the perc test or soil evaluation for septic, utility access to the property line, and zoning for the home you want to build. A lot that cannot be built on as planned is a hard problem to unwind. Make the lot purchase contingent on those checks, and confirm the details with the county before you release earnest money.
Worked Example: A Stafford Build for a Relocating Service Member
This is an illustration, not a quote or a promise of approval. Suppose a service member is relocating to Quantico and plans a one-time-close build in Stafford County with these figures:
- Lot price: $150,000
- Construction cost: $450,000
- Total project: $600,000
- Down payment or equity: $60,000 (10%)
- Base loan amount: $540,000
With 10% down and first use of VA entitlement, the funding fee in the VA table as of this writing would be 1.25%, or $6,750 on $540,000. Service members with certain service-connected disabilities are exempt. Verify the current fee on VA.gov and confirm that a VA-eligible construction path is available for your project. For more on timing a move, see our PCS guide for Quantico VA loans.
Now the payments, using an example rate of 6.75%. When $200,000 has been drawn, interest-only is $200,000 x 0.0675 / 12 = $1,125 per month. When $360,000 has been drawn, it is $2,025 per month. After conversion, principal and interest on $540,000 over 30 years is about $3,502 per month, before taxes and insurance.
Rate protection matters on an 8 to 12 month build. If the rate is locked at 6.75% and market rates rise to 7.5% before completion, the same loan would cost about $3,776 per month. That is roughly $274 more every month. A float-down option lets you take a lower market rate if one appears. If rates fall to 6.25%, the payment would be about $3,325, roughly $177 less than at the locked rate. Float-down terms, fees, and lock lengths vary, so ask exactly what is offered, and read our explainer on the mortgage rate lock period to understand how long a lock lasts.
Also plan for housing costs during the build. A member may carry rent or a temporary housing cost while the house goes up. Use the DoD BAH calculator to check the current rate for the Stafford or Quantico ZIP and build your budget around it.
Broker Access Versus a Single-Source Shelf
Construction lending is where product access matters most. Many retail institutions limit it, price it narrowly, or skip it, and a buyer who asks only one source gets only that source’s answer. Duane Buziak works as an independent broker with access to 500+ lending partners, which means the structure can be matched to the buyer rather than the buyer to the structure.
| Factor | Duane Buziak (independent broker, 500+ lending partners) | Single-source retail shelf |
|---|---|---|
| Construction programs available | Multiple programs compared side by side | One institution’s menu, which may exclude construction |
| One-time-close availability | Offered through multiple partners, where eligible | Varies by institution; some offer only construction-only loans |
| VA construction access | Pursued through partners that offer it, subject to VA rules | Often not offered |
| Non-QM, bank statement, DSCR options | Available through partners for self-employed buyers and investors | Often not part of the menu |
| Rate shopping | Pricing compared across partners | One rate sheet |
| Availability | 24/7 contact, useful across PCS time zones | Typically standard bank hours |
Other mortgage companies in the area, including Movement, Atlantic Coast Mortgage, UHM, Frye Lending, and Lendit, each run their own product menus. Ask any of them directly whether they offer one-time-close construction, VA construction, and non-QM options, then compare the answers against the table.
Start with NoTouch Credit pre-qualification. It is a soft pull mortgage broker step that lets you compare structures without a hard inquiry on your report.
Pre-Qualification to Final Conversion in Order
- Soft-pull pre-qualification. Learn your range and which structures fit, without a credit hit.
- Choose the structure. One-time close, construction-only, or a separate land loan.
- Select the builder and lot. Confirm the license, the perc test, utilities, and zoning.
- Submit plans and budget. The builder contract, plans, and specifications go into underwriting.
- Appraisal. The home is valued as completed, based on the plans.
- Closing. Sign once on a one-time-close loan.
- Draws. Funds release in stages after inspections while you pay interest on the drawn balance.
- Conversion. The loan becomes a standard mortgage, or you close the permanent loan on a construction-only structure.
Expect to provide the signed builder contract, plans and specifications, the builder’s license and insurance, and a lot survey. VA buyers also need the Certificate of Eligibility from VA.gov. The CFPB’s home buying resources are a useful neutral reference for understanding the loan documents you will sign. If you want to see what an approval letter should include, review our guide to mortgage pre-approval letter requirements.
Build in time and a cushion. A new build commonly takes 8 to 12 months, and weather, permitting, and supply delays can stretch that. Cost overruns happen too, and many programs require a contingency reserve on top of the base budget. Set aside extra cash even if it is not required.
Match the Structure to Your Eligibility and Your Timeline
The right structure depends on what you qualify for and when you need to move. A PCS buyer with VA entitlement, a self-employed buyer with bank statement income, and a King George buyer on a USDA-eligible lot each end up on different loans. Duane Buziak can lay out those options side by side, with the numbers, before you commit to a lot or a builder.
Ready to compare your options with a broker who works for you, not the bank? Call or text Duane Buziak at (540) 870-5594 or visit FredericksburgMortgages.com to get started with a no-credit-hit pre-qualification today. A no hard inquiry mortgage pre approval takes the guesswork out of the first step.