Construction Financing
The Right Loan Can Make
Your Dream Home Possible
Most people don't realize how many financing options exist for building or upgrading a home. From zero-down VA construction loans to energy efficiency mortgages, the right program can dramatically change what's possible — and what it costs. We've partnered with a top construction lender who understands both sides of the build to make sure you never leave money on the table.
Financing applications are handled by independent lending partners.
Call or Text (281) 939-5191Free Financing Consultation
Find Out What You Qualify For
Tell us a little about your project and we'll connect you with the right financing option. No obligation, no pressure — just real answers.
Why This Matters
Construction Financing Is Different — And Most Lenders Get It Wrong
A standard mortgage is straightforward: a lender evaluates a finished home, assigns a value, and funds the purchase. Construction financing is a different animal entirely. The lender is funding something that doesn't exist yet — which means they need to understand construction draws, builder qualifications, inspection schedules, and how to evaluate a project mid-build. Most retail mortgage lenders don't have that expertise, and homeowners who go to the wrong lender often find themselves stuck, delayed, or paying far more than they should.
That's why we've built a partnership with a lender who specializes in construction financing — someone who has processed hundreds of construction loans across Texas, understands the draw process, and can structure a program around your specific situation. Whether you're building from the ground up on raw land, adding a major addition to your existing home, or funding a full gut renovation, there's a loan product designed for exactly what you're trying to do.
Below, we've broken down the most important programs available to Texas homeowners and builders. Read through them, identify what resonates with your situation, and then apply online or give us a call. The right answer is usually clearer than you think once you have the full picture.
Build New Construction
One-Time Close Construction Loans
One-time close (OTC) loans are the gold standard for new home construction. You apply once, qualify once, and close once — combining your construction loan and your permanent mortgage into a single transaction. No second appraisal. No second round of closing costs. No risk of not qualifying for your permanent loan after the house is built.
VA One-Time Close Construction Loan
MOST POPULAR FOR VETERANS0% Down · No PMI · For Eligible Veterans & Active Military
If you've served our country, you've earned one of the most powerful home-building tools available: the VA One-Time Close Construction Loan. This program combines your construction financing and your permanent mortgage into a single loan with a single closing — meaning you pay closing costs once, lock your rate once, and never have to requalify when construction is complete.
The headline feature is the down payment: eligible veterans can build a brand-new custom home with zero money down. There is no private mortgage insurance (PMI), and VA loans consistently carry some of the most competitive interest rates in the market. The loan covers the full construction period, converting automatically to your permanent 30-year (or 15-year) mortgage the moment your certificate of occupancy is issued. Eligibility is based on your Certificate of Eligibility (COE) from the VA, your credit profile, and the appraised value of the completed home. Land equity — if you already own your lot — can often substitute for a cash down payment, making this program accessible even if you don't have significant savings on hand.
FHA One-Time Close Construction Loan
GREAT FOR FIRST-TIME BUILDERSAs Little as 3.5% Down · Flexible Credit · Single Closing
The FHA One-Time Close Construction Loan is the go-to program for buyers who want to build new but don't have a large down payment saved — or whose credit history isn't quite picture-perfect. Backed by the Federal Housing Administration, this loan requires as little as 3.5% down and is available to a wide range of borrowers who wouldn't qualify for conventional financing.
Like its VA counterpart, the FHA One-Time Close wraps your construction loan and your permanent mortgage into a single transaction. You apply once, qualify once, and close once. During construction, you make interest-only payments on the funds drawn. When your home is complete, the loan converts seamlessly to your permanent FHA mortgage — no second appraisal, no second underwriting, no second round of closing costs. FHA guidelines allow credit scores as low as 580 for the 3.5% down option, and down payment funds can come from gifts, grants, or down payment assistance programs. If you already own your land, that equity typically satisfies the down payment requirement entirely.
Conventional One-Time Close Construction Loan
BEST RATES FOR STRONG CREDITCompetitive Down Payments · No FHA Premiums · Flexible Terms
For borrowers with strong credit and stable income, the Conventional One-Time Close Construction Loan often delivers the lowest total cost of financing. Without FHA mortgage insurance premiums or VA funding fees, a conventional OTC can save you thousands over the life of the loan — and once you reach 20% equity, PMI drops off.
Conventional OTC loans follow Fannie Mae and Freddie Mac guidelines, which means they're available through a wide network of lenders and carry predictable terms. Down payments typically start at 5% for primary residences, and if you own your land outright or have significant equity in it, that value counts toward your down payment requirement. These loans are particularly well-suited for move-up buyers, investors building a primary residence, and anyone who prefers to avoid government-backed loan requirements. Jumbo conventional OTC options are also available for higher-value custom home builds in the Greater Houston market.
Two-Time Close Construction Loan
MAXIMUM FLEXIBILITYSeparate Construction & Permanent Loans · Rate Flexibility · Ideal for Complex Builds
Not every build fits neatly into a one-time close box — and that's perfectly fine. The two-time close construction loan keeps your construction financing and your permanent mortgage as two separate transactions, which can be a strategic advantage in the right situation.
Here's the core trade-off: you'll pay closing costs twice, but you gain the ability to shop for the best permanent mortgage rate after your home is complete. If you're building in a rising-rate environment and expect rates to improve, or if your financial picture is expected to change significantly during construction (a business sale, a vesting event, a retirement), locking into a permanent rate today may not be in your best interest. Two-time close loans are also useful when the construction timeline is unusually long, when the property is complex (large acreage, unique construction type), or when the borrower's income documentation is better suited to a separate underwriting process at the end of construction. Your lending partner will help you model both scenarios side by side so you can make the right call for your situation.
Upgrade Your Existing Home
Renovation & Equity-Based Financing
Already own your home? Your equity is one of the most powerful financial tools you have. These programs let you tap into that equity — or leverage special government programs — to fund the renovation, addition, or upgrade you've been putting off.
Cash-Out Refinance
If you already own your home and have built up equity, a cash-out refinance lets you replace your existing mortgage with a new, larger loan — pocketing the difference in cash. This is one of the most cost-effective ways to fund a major remodel, a large addition, or even a new detached structure on your property. Rates are typically lower than personal loans or credit cards, and the interest may be tax-deductible when used for home improvements. A cash-out refi makes the most sense when current rates are close to or better than your existing rate, or when you need a large lump sum for a defined project.
Home Equity Line of Credit (HELOC)
A HELOC works like a credit card secured by your home's equity — you draw what you need, when you need it, and pay interest only on what you've used. This makes it an excellent tool for phased projects: fund the kitchen this year, the master bath next year, the outdoor kitchen the year after. Texas HELOCs allow you to borrow up to 80% of your home's appraised value minus any existing mortgage balance. The draw period typically lasts 10 years, followed by a repayment period — giving you a long runway to complete your vision without taking on a fixed large payment upfront.
FHA 203(k) Rehab Loan
The FHA 203(k) is a renovation mortgage that wraps the purchase price (or existing loan balance) and the cost of repairs or improvements into a single loan. It's designed for homes that need work — whether you're buying a fixer-upper and want to renovate before you move in, or you own a home that needs significant structural or cosmetic upgrades. The Standard 203(k) covers major renovations including structural changes, room additions, and full kitchen/bath overhauls. The Limited 203(k) covers smaller projects up to $75,000. Both require a HUD-approved consultant to oversee the work — which is where having an experienced builder in your corner makes all the difference.
Energy Efficiency Mortgages (EEM)
An Energy Efficient Mortgage allows you to finance the cost of energy-saving improvements — solar panels, spray foam insulation, high-efficiency HVAC systems, tankless water heaters, energy-rated windows — directly into your home loan. Available through FHA, VA, and conventional programs, EEMs recognize that energy upgrades reduce your monthly utility bills, which effectively increases your ability to repay a slightly larger mortgage. In Texas's climate, the payback on energy efficiency is faster than almost anywhere in the country. Building green isn't just good for the planet — it's good math.
Already Own Your Land?
Your Lot Equity Can Replace Your Down Payment
If you own your land free and clear — or have significant equity in it — most construction loan programs will count that equity as your down payment contribution. This means you may be able to build a brand-new custom home with little to no cash out of pocket, using equity you've already built. This applies to VA, FHA, and conventional one-time close programs. It's one of the most underutilized advantages in construction financing, and it's worth exploring before you assume you need to save more cash.
Financing applications are handled by independent lending partners.
The Process
How Construction Financing Works
Pre-Qualification
Apply online in minutes. Your lending partner reviews your credit, income, and project scope to determine which programs you qualify for and what your budget looks like.
Loan Approval
Once you're approved, the lender issues a commitment letter. This is your green light to finalize your builder contract, floor plans, and project timeline.
Construction Draws
As construction progresses, funds are released in scheduled draws tied to completed milestones — foundation, framing, rough-in, drywall, completion. You pay interest only on what's been drawn.
Conversion to Permanent
When your certificate of occupancy is issued, your construction loan automatically converts to your permanent mortgage. One loan, one rate, one payment — done.
Our Lending Partnership
A Lender Who Understands Both Sides of the Build
Most mortgage lenders understand mortgages. Fewer understand construction. Our lending partner is the rare exception — a team that has processed hundreds of construction loans across Texas and genuinely understands what happens on a job site. They know how draws work, how inspections are scheduled, what builders need to keep a project on timeline, and how to structure a loan that serves the homeowner from groundbreaking to move-in.
That expertise matters more than most homeowners realize. A lender who doesn't understand construction draws can delay a project by weeks. A lender who doesn't understand builder qualifications can create friction that derails a deal entirely. Our partner has seen it all — and built their process specifically to avoid those pitfalls.
When you work with TX Strong Builders and our lending partner together, you get a team that communicates on your behalf — builder and lender aligned, working toward the same goal. That coordination is rare in this industry, and it makes a measurable difference in how smoothly your project goes.
Financing applications are handled by independent lending partners.
Ask Us a QuestionFinancing Questions, Answered
Can I use a construction loan if I already own my land?
Yes — and this is one of the best situations to be in. If you own your land - have a loan on it or free and clear, most construction loan programs will count that equity as your down payment contribution. Depending on the land value relative to the total project cost, you may be able to build with little to no cash out of pocket. This applies to VA, FHA, and conventional one-time close programs.
What credit score do I need for a construction loan?
It depends on the program. FHA one-time close loans are available with scores as low as 580. VA loans have no official minimum score, though most lenders look for 620 or higher. Conventional programs typically require 640 or better for the most competitive rates. If your credit needs work, our lending partner can help you understand what steps would make the biggest difference before you apply.
How is a construction loan different from a regular mortgage?
A regular mortgage funds the purchase of a finished home. A construction loan funds the building process — releasing money in stages (called draws) as construction milestones are completed. During construction, you typically pay interest only on the funds that have been drawn. With a one-time close loan, the construction loan automatically converts to your permanent mortgage when the home is complete. With a two-time close, you refinance into a new permanent loan at the end of construction.
How long does it take to get approved for a construction loan?
Pre-qualification can happen in 4 hours - depending on the complexity of your project and how quickly documentation is gathered. Starting the financing process early — before you finalize your builder contract — gives you the most flexibility and the best chance of keeping your project on schedule.
Can I use a construction loan for a renovation, not a new build?
Yes. The FHA 203(k) rehab loan is specifically designed for renovation financing. Cash-out refinances and HELOCs are also excellent tools for funding major remodels, additions, and upgrades to existing homes. The right product depends on how much equity you have, how large the project is, and whether you prefer a lump sum or a revolving line of credit.
What is a construction draw, and how does it work?
A draw is a scheduled disbursement of loan funds tied to a completed construction milestone. Common draw stages include: lot clearing and foundation, framing, rough plumbing/electrical/HVAC, insulation and drywall, interior finishes, and final completion. Before each draw is released, a lender-ordered inspection confirms the work has been completed. This protects both the borrower and the lender, and it ensures funds are always aligned with actual progress on the job site.
Prefer to talk? Call or text us directly.
Call (281) 939-5191Financing applications are handled by independent lending partners.
Loans Originated by First Colony Mortgage NMLS 3112 · Dustin Carlson NMLS 193009 · TX Strong Builders is not a lender or financing company. Financing applications are handled by independent lending partners.