Two closings
Traditional Construction Loan
Interest-only during the build. Converts to (or requires refinance into) a permanent mortgage at completion. Two closings, two sets of costs.
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05 · Financing Guide
Construction loans in Pennsylvania, explained slowly.
Construction loans are more complex than a standard mortgage, and the wrong structure can cost tens of thousands. This is the complete guide, written for buyers who want to understand it before they sign anything.
Builder preferred lenders
The most misunderstood decision in a build.
Most large production builders have an in-house or affiliated mortgage lender. They offer meaningful incentives: closing-cost credits, design-studio credits, appliance packages, but only if you finance with them.
These programs can genuinely be the right choice. They can also cost you thousands in overpriced rates that outweigh the incentive. The answer isn't "always take it" or "always refuse it," it's "run the real numbers side by side."
What to actually compare
- The rate the preferred lender is offering vs. an outside lender's rate on the same day.
- The dollar value of the builder incentive (closing costs, design credits, upgrades).
- Any extended-rate-lock fee, and how many days it covers.
- Whether the incentive requires you to use their title/settlement company too.
- Fine print about lock extensions if the build runs long.
Corie will run this comparison for free before you sign. It's part of the job.
Down payment and equity
What you'll actually put down.
- Conventional CTP
- 10 to 20%
- Standard construction-to-permanent
- Jumbo CTP
- 15 to 30%
- Above conforming loan limits
- VA Construction
- 0%
- Eligible veterans
- FHA Construction
- 3.5%
- Owner-occupied primary residence
Using land equity
Own the lot already? Its appraised value typically counts toward your down payment. For example, on a $700,000 build with a $150,000 lot you already own, you may only need a small additional cash contribution to hit the required equity threshold. This is one of the most under-used tools in construction financing.
Ready to run your real numbers?
Share your build budget, timeline, and lot situation and we'll compare loan structures, lock lengths, and any builder incentive before you sign anything.
Loan types
Six ways to finance a build.
The right one depends on whether you're on a production, semi-custom, or fully custom track, and on how much rate exposure you're comfortable holding.
Most common
Construction-to-Permanent (CTP)
One loan that funds the build and converts to a permanent mortgage automatically at completion. One closing, one set of costs.
Rate-lock friendly
One-Time-Close (OTC)
Similar to CTP, with a single locked rate for both phases. Ideal when rates are trending up during your build window.
Production builders
Builder-Financed Production
The builder carries the construction cost; you close on the finished home with a standard mortgage. Common with Keystone, Landmark, Garman, and other large production builders.
Rate protection
Forward Commitment
A rate reservation for a future closing, sometimes 12+ months out. Common on new-construction communities. Costs a small fee but protects against rate movement.
Land first
Lot Loan
Short-term financing to purchase land while you finalize plans and permits. Rolls into your construction loan at build start.
Interactive financing timeline
From “I want to build” to first mortgage payment.
Pre-approval
Two weeks before you tour builders.
Builder contract
Signed with selected floor plan and lot.
Loan application
Full underwriting begins.
Appraisal
Based on plans, specs, and lot, not comps to existing homes.
Closing
For CTP/OTC: one closing that opens the construction phase.
Draws
Funds released to builder at construction milestones.
Completion
Certificate of occupancy, final inspection.
Conversion
Loan converts to permanent mortgage (or refinances).
First mortgage payment
Roughly 30 days after conversion.
Run the numbers
Corie will run these for you with real, current rates before you sign. For a quick gut check, use the standard mortgage calculators, but remember that construction adds interest-only carry cost during the build window.
Construction checklist
Twelve items to check before you sign.
Print this. Bring it to every builder appointment. If a builder can't answer a line item cleanly, that's data.
- 01Get pre-approved before touring builder communities.
- 02Ask for the builder's preferred-lender rate sheet in writing.
- 03Ask any outside lender for a same-day rate quote to compare.
- 04Confirm the extended rate lock length and any float-down provisions.
- 05Get the builder incentive listed as a specific dollar amount, not a range.
- 06Understand what happens if your build is delayed past the lock expiration.
- 07Confirm whether your existing land equity can count toward your down payment.
- 08Budget for a 10 to 15% contingency on the total build cost.
- 09Confirm insurance requirements: builder's risk vs. homeowners.
- 10Know your appliance, landscaping, and window treatment budget separately.
- 11Get the full draw schedule from the builder before signing.
- 12Line up your permanent lender before construction begins (for two-close only).
Program types
Every construction loan starts with a program.
Conventional Construction
The default for most buyers. Conforming and jumbo tiers. Best rate options for well-qualified borrowers.
Jumbo Construction
Loan amounts above the conforming limit. Common on custom builds and estates. Down payment and reserve requirements are higher.
VA Construction
Zero-down construction financing for eligible veterans. Fewer lenders offer it. The Corie Adams Lending Team does.
FHA Construction
3.5% down for owner-occupied primary residences. Property standards are strict; not every builder is compatible.
Loan process
How the money actually moves.
During construction
- The loan is opened at closing (for CTP/OTC) with funds held in escrow.
- Builder submits draw requests at completed milestones: foundation, framing, mechanicals, finishes.
- The lender inspects, then releases funds directly to the builder.
- You pay interest only on the drawn balance, not the full loan.
- Rate is locked (with CTP/OTC) or floating (with two-close construction).
At completion
- Final inspection and certificate of occupancy.
- CTP / OTC: loan converts automatically to the permanent mortgage phase.
- Two-close: you refinance into a standard mortgage (separate closing costs apply).
- First mortgage payment is typically due about 30 days later.
- Homeowners insurance updates from builder's-risk to standard.
Where we lend
Construction financing across the markets we serve.
Corie Adams has funded 565+ new construction homes and 595 loans overall, which means most of the questions on this page have already come up on a real file: a draw that landed late, a lock that needed extending, a builder contract with an unusual deposit schedule.
The structures described here are available throughout Pennsylvania. What changes by market is the land, the builder mix and the timeline, not the loan.
Keep reading
- Buying a home the builder is building if the builder owns the lot and you close once at delivery.
- The Building a Home education center for builder selection, budgets and timelines.
- Lancaster, York, West Chester and Harrisburg market pages.
Frequently asked
The questions we get every week.
Do I need two loans to build?
Not usually. A construction-to-permanent (CTP) or one-time-close (OTC) loan combines both phases into a single closing, saving you the second set of closing costs a two-close structure would require.
What credit score do I need for a construction loan?
Most conventional programs require 680+; jumbo tiers commonly require 700 to 740+. VA and FHA construction have their own thresholds. Score alone isn't the whole picture: down payment, reserves, and DTI all matter.
How long is a construction rate lock?
Production builders often lock 180 to 270 days. Custom builds routinely lock 12 to 18 months. Longer locks cost more but protect you from rate movement during the build window.
Can I use my existing home equity as a down payment?
Yes, via a HELOC or cash-out refinance, or by selling and using proceeds. Timing matters; talk to a lender before pulling equity out.
What happens if construction runs long?
You'll typically pay a lock extension fee. Some programs offer float-down or free extensions up to a limit. Always ask.
Do I have to use the builder's preferred lender?
No, never. Builder incentives may be tied to them, but no builder can require you to use them. Compare the full package.
Are construction loan rates higher than regular mortgage rates?
The permanent phase rate is essentially a normal mortgage rate. Construction-phase interest may be slightly higher on some programs, but with CTP/OTC you get one blended structure.
What if the appraisal comes in low?
On new construction, the appraisal is based on plans and specs, not comparable sales, but it still has to support the build cost. If it comes in low, you'll typically need additional down payment or a price adjustment.
Can I do a construction loan on a second home?
Yes, but down payment requirements are higher and program options are narrower.
Can I get a construction loan for a manufactured or modular home?
Modular yes, in many cases. True manufactured homes have separate programs with different rules.
What's the difference between a lot loan and a construction loan?
A lot loan finances the land only. It's short-term and typically rolls into your construction loan when the build begins.
Is USDA construction financing available in Lancaster County?
In eligible rural census tracts, yes. Corie can check specific addresses.
How do builder incentives interact with the loan?
Typically as a closing-cost credit at closing. The IRS treats them differently than a rate buydown, so understand the tax and rate math together.
Can Corie help even if I've already chosen a builder?
Yes, as long as you haven't closed the loan. Even after signing a builder contract, you retain the right to shop the mortgage side.
Educational information only. Construction loan structures, rate lock lengths, down payment requirements, draw schedules, and builder incentive treatment vary by loan program, market, and investor guidelines and are subject to change without notice. Nothing here is a commitment to lend, an offer of terms, or a guarantee of financing. All buyers are subject to full underwriting and program eligibility.
Before you sign a builder contract
Fifteen minutes could reshape the whole build.
Every construction loan structure implies a set of trade-offs: rate lock length, down payment, draw schedule, contingency handling, and how builder incentives get treated. Get the structure right first.