Lending
Construction Loans in the Sacramento Region
Loans to build a home on your lot, with one-time and two-time close options compared across lenders.
Talk to Maggie directly: cell (916) 549-3131 (text or call) · maggie@loveyoursurroundings.coMaggie B. Hopkins, NMLS #349517 · Surroundings NMLS #2528307
What is a construction loan?
A construction loan pays for building a home while the work happens. It's a short-term loan. When the home is finished, a long-term mortgage takes its place, the same kind of loan you'd use on a home that already exists.
Fannie Mae's Selling Guide (topic B5-3.1-01, dated June 4, 2025) calls that long-term loan construction-to-permanent financing. It says you must hold title to the lot, either bought earlier or bought as part of the same transaction.
Fewer lenders make construction loans than make regular mortgages, and their rules differ. As a mortgage broker, Maggie B. Hopkins compares what several of them offer for your project. Give yourself options before you sign with a builder.
What is the difference between a one-time close and a two-time close?
There are two ways to set up the loan:
- One-time close. The construction loan and the permanent mortgage close together, before work starts. Fannie Mae's Selling Guide (topic B5-3.1-02, dated May 6, 2026) says the loan converts to a permanent mortgage when construction is done. It caps each construction period at 12 months and the total at 18 months. One set of closing papers covers both phases.
- Two-time close. You close a construction loan first, then close a separate permanent mortgage when the home is finished. Fannie Mae's topic B5-3.1-03 (dated August 7, 2019) says the permanent lender can be a different lender than the one that funded the build. You're qualified again at the second closing.
FHA offers a one-time close as well. HUD's Handbook 4000.1 (edition last revised November 9, 2021) describes FHA Construction to Permanent as a single closing before construction starts, on land you own or are buying.
A one-time close settles your financing up front. A two-time close gives you a second chance to shop the permanent loan, with a second approval and a second set of closing costs. We lay out both for your project so you can compare them.
How do draws work while your home is being built?
The lender doesn't hand over the full loan on day one. Money is released in stages, called draws, as the work is done. Fannie Mae's single-closing topic (May 6, 2026) says the lender manages paying the builder, contractors and suppliers during construction.
A typical draw goes like this. The builder finishes a stage, such as the foundation or framing. The lender confirms the work is in place, often with an inspection. Then that stage's money is paid out. Each lender sets its own draw schedule and inspection steps, so ask to see them before you choose a lender.
During construction you usually pay only on the money drawn so far. Ask each lender how payments work in the build phase and what changes when the loan converts.
What will the lender review before you break ground?
A construction lender is lending on a home that doesn't exist yet. So it looks at the project as closely as it looks at you:
- The builder. HUD's Handbook 4000.1 says an FHA construction-to-permanent borrower must contract with a licensed general contractor. You can act as your own builder only if you're a licensed general contractor yourself. Other lenders set their own builder rules.
- The plans and specs. What's being built, room by room and finish by finish.
- The budget. The builder's contract and cost breakdown, plus any items you're paying for outside that contract.
- A contingency. Builds can run over. Many lenders and builders plan a cushion in the budget for surprises. Ask how much each lender expects and where it comes from.
- The lot. Ownership, access, utilities and permits.
- Your file. Income, assets and credit, the same as any mortgage.
Getting these lined up early keeps the start date from slipping.
How does the appraisal work on a home that isn't built yet?
The appraiser values the home "as completed," based on the plans and specs. Fannie Mae's single-closing topic (May 6, 2026) says a purchase is measured against the lower of the purchase price or that as-completed value.
When the work is done, the appraiser checks the finished home. Fannie Mae calls this an appraisal update and completion report (Form 1004D). If that update shows the value went down, the lender must get a new appraisal and qualify you again.
That's one more reason to match the plans to what homes like it sell for nearby. As a real estate broker too, Maggie can show you recent sales before you finalize the plans.
What if you want to renovate instead of build?
If the home already exists and needs work, a renovation loan may fit better than a construction loan. HUD's Handbook 4000.1 describes the FHA 203(k) program for buying and fixing a home, or refinancing and fixing one, in a single loan. It covers one- to four-unit homes and the interior of an eligible condo.
Some lenders offer conventional renovation loans too. Like construction loans, these pay out for the work in stages. If you're weighing a fixer against building new, we can price both paths. Our FHA loan page and conventional loan page cover the basics of each loan family.
Why does it help to have one team for the lot and the loan?
Maggie is a licensed real estate broker as well as a mortgage broker. If you still need land, the same team can help you find a lot and write the offer. We can check zoning questions, utilities and access while we line up the loan.
That matters because the lot and the loan affect each other. How long you've owned the land, what you paid and whether it's ready to build on all shape your financing. Fannie Mae's two-closing topic (August 7, 2019), for example, requires you to hold title to the lot for at least six months before a cash-out permanent loan.
You're always free to use any lender you like. Want to build a modular home instead of a site-built one? Construction financing can cover that too.
How do you start a construction loan?
Fill out the loan options form and tell us about the project: where the lot is, whether you own it and your timeline. Maggie will look at it and get back to you within 2 hours. You can also call Maggie's cell at (916) 549-3131.
Bring the builder's bid, the plans and your lot details if you have them. Want a feel for the monthly cost after the build? Try our mortgage calculator. For an overview of every specialty loan we arrange, see USDA, construction and mobile home loans.
Frequently Asked Questions
What is a construction-to-permanent loan?
It's financing that covers the build and then becomes, or is replaced by, a long-term mortgage when the home is finished. It can close once before construction or twice, once for the build and once for the permanent loan.
How long can construction take on a one-time close loan?
Fannie Mae's Selling Guide (topic B5-3.1-02, dated May 6, 2026) caps each construction period at 12 months and the total at 18 months for single-closing loans it buys. Other programs and lenders set their own limits.
Can I be my own builder?
It depends on the program. HUD's Handbook 4000.1 says an FHA construction-to-permanent borrower can act as general contractor only if they are a licensed general contractor. Other lenders have their own rules, so ask before you plan around it.
Do I need to own the lot first?
No. You can own it already or buy it as part of the loan. Fannie Mae and FHA both allow either. How long you've owned the land can affect how its value counts in your loan.
What happens if the home appraises for less once it's built?
Under Fannie Mae's single-closing rules (May 6, 2026), a lower value at completion means a new appraisal and qualifying again on the updated numbers. Checking the plans against nearby sales before you build lowers that risk.
Talk to Maggie directly: cell (916) 549-3131 (text or call) · maggie@loveyoursurroundings.coMaggie B. Hopkins, NMLS #349517 · Surroundings NMLS #2528307
Loans are arranged through Maggie B. Hopkins, NMLS #349517 · Surroundings NMLS #2528307. This is not a commitment to lend. All loans subject to credit approval and property qualification. Equal Housing Lender.
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