Florida Construction Loans

Florida construction loans fund the land, the build and the permanent mortgage. Whether that happens in one closing or two is the decision that carries the risk.

Key features of Florida construction loans

• Construction-to-permanent, which closes once
• Stand-alone construction, which closes twice
• Down payment of 5% to 20%, depending on the program
• Interest-only during the build, typically 12 to 18 months
• Converts to a permanent mortgage at completion
• FHA, VA and conventional construction programs all exist
• A licensed and insured builder is required

One closing or two decides who carries the rate risk

This is the choice that matters, and it is really a question about what happens twelve months from now.

With construction-to-permanent, you qualify once and close once. The permanent loan is set at the start, so your rate and your approval are locked before the first block is laid. Many programs include a float-down if rates fall before completion. You usually pay a little more for that certainty.

With a stand-alone construction loan, you finance the build, then apply again for the permanent mortgage at completion. That second application is a fresh underwrite. Therefore if rates have risen, if your income changed, if you took on other debt, or if the appraisal comes in below cost, you carry that entirely. Builders sometimes prefer this route, and it can price better, though the exposure sits with you rather than with them.

Since a Florida build regularly runs longer than planned, ask what happens if construction overruns the term. Extension terms differ sharply between lenders and are worth more scrutiny than a quarter point of rate.

What Florida adds to a build

Florida’s building code demands hurricane-resistant construction, and in the high-velocity wind zone the Miami-Dade protocol applies. Impact windows, reinforced roof connections and specified fastening schedules are standard rather than upgrades. As a result the cost per square foot runs above much of the country, and your budget needs to reflect that from the start rather than absorbing it as change orders.

Two practical checks. Verify your builder’s licence at MyFloridaLicense before you sign anything, since the lender will require an active licence anyway. Then get an insurance quote on the finished specification early, because a home built to current wind standards often insures better than an older house nearby, and that difference belongs in your affordability calculation.

After completion, file for the homestead exemption in the following year, once the home is your primary residence on 1 January.

Who this suits

• Buyers building a custom home in Florida
• Buyers who want new construction where inventory is thin
• Owners of land who are ready to build on it
• Anyone who wants a home built to current wind codes rather than retrofitting an older one

Construction loan terms, extension provisions and draw schedules are set by each lender and vary widely. Florida building requirements follow the Florida Building Code, including the High-Velocity Hurricane Zone provisions. Confirm current terms before you rely on any figure here.