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Construction Loan in Florida

Everything you need to know about using a Construction Loan to buy a home in Florida. Expert guidance from Barrett Henry, REALTOR® at REMAX Collective.

How a Construction Loan Works

A construction loan finances the building of a new home from the ground up — covering lot purchase, site preparation, materials, labor, and everything through final inspection and certificate of occupancy. In Florida, the most common approach is a construction-to-permanent (CTP) loan, which starts as a short-term construction loan during the build phase and automatically converts to a permanent 30-year mortgage once the home is complete. This single-close structure means one application, one set of closing costs, and one rate lock — compared to the old two-close method where you had to qualify and pay closing costs twice.

Building a home in Florida involves state-specific requirements that directly affect your construction loan. Florida Building Code (FBC) mandates wind resistance standards based on your county's wind zone, with the highest requirements along the coast. All new construction must meet the 2023 Florida Building Code (8th edition), which includes enhanced hurricane protection, energy efficiency standards (Florida Energy Code), and flood zone compliance. Your construction lender will require a licensed Florida general contractor (CGC or CBC license), detailed architectural plans stamped by a Florida-licensed architect or engineer, and proof of all required permits before releasing the first draw.

Barrett Henry, Broker Associate at REMAX Collective with 23+ years of real estate experience, works with buyers building custom homes in Tampa Bay communities across Hillsborough, Pasco, Pinellas, Polk, and Manatee counties. Whether you are purchasing a lot in a rural Pasco community, building on acreage in eastern Hillsborough, or tearing down a teardown in South Tampa to build new, Barrett can connect you with experienced construction lenders and licensed builders. Construction loans are more complex than standard purchase mortgages — start the conversation early by calling (813) 733-7907.

Construction Loan Eligibility Requirements

Minimum credit score of 680 for most construction-to-permanent lenders, with 700+ preferred for the best rates — some credit unions and community banks will go to 660 with compensating factors like large down payments or low DTI
Down payment of 20% to 25% of the total project cost (land plus construction) — some lenders accept 10-15% down with PMI for well-qualified borrowers, but 20% is the standard for construction loans
Licensed Florida general contractor with an active CGC (Certified General Contractor) or CBC (Certified Building Contractor) license — the lender will verify the license, insurance ($1M+ general liability and workers comp), and check for any complaints with the Florida DBPR
Detailed construction plans, specifications, and a fixed-price or cost-plus contract with the builder — the lender needs to know exactly what is being built, the total cost breakdown, and the projected timeline before approving the loan
Debt-to-income ratio of 43% or lower based on the future permanent mortgage payment (not the interest-only construction phase payment) — lenders qualify you on the long-term payment to ensure you can afford the home once construction is complete
Appraisal based on plans and specifications (subject-to appraisal) — a licensed appraiser reviews the blueprints and comparable new construction sales to determine the as-completed market value; the loan amount is based on this projected value
Land must be purchased or already owned — if you are buying the lot separately, many CTP lenders will finance the lot purchase as part of the construction loan; if you already own the lot, its equity can count toward your down payment
Builder must provide a detailed draw schedule (typically 5-7 draws) tied to construction milestones — foundation, framing, dry-in (roof/windows/doors), mechanical rough-in, drywall, finish, and final inspection/CO

Benefits of a Construction Loan

Single-close construction-to-permanent loans mean one application, one appraisal, one set of closing costs, and one rate lock — saving $3,000-$8,000 compared to a two-close approach and eliminating the risk of not qualifying for the permanent loan after construction

Interest-only payments during construction: you only pay interest on the funds that have been drawn (disbursed) so far, not the full loan amount — early in construction when only 10-20% has been drawn, your payments are very low

Build exactly what you want: choose your floor plan, finishes, lot orientation, and features like a pool, outdoor kitchen, owners suite layout, and hurricane-rated impact windows — no compromises or costly renovations after purchase

Florida Building Code compliance from day one: new construction meets the 2023 FBC 8th edition standards for wind resistance, energy efficiency, and flood protection — this qualifies you for the lowest possible homeowners insurance rates and wind mitigation credits

Lock your permanent rate at closing: with a single-close CTP loan, your 30-year fixed rate is locked before construction begins — if rates rise during the 6-12 month build, you are protected; some lenders offer a float-down option if rates drop

Finance the lot purchase into the construction loan — no need for a separate land loan; the lot cost, site preparation, impact fees, and construction costs are all rolled into one loan with one down payment

Built-in inspections protect your investment: the lender sends a third-party inspector before each draw to verify that work has been completed per plans and specifications — this catches quality issues early and ensures the builder stays on track

Energy savings from day one: new Florida homes built to current code are significantly more energy efficient than existing homes, with estimated savings of 20-35% on utility costs through better insulation, impact-rated windows, high-efficiency HVAC, and modern building envelopes

Frequently Asked Questions About Construction Loans in Florida

How does a construction-to-permanent loan work in Florida?

A construction-to-permanent (CTP) loan is a single loan that covers both the construction phase and the permanent mortgage. You close once, lock your rate, and make interest-only payments during the 6-12 month build phase. Once the home passes final inspection and receives its certificate of occupancy, the loan automatically converts to a standard 30-year (or 15-year) mortgage with principal and interest payments. No second closing, no second set of fees.

How much does it cost to build a home in Florida in 2026?

In the Tampa Bay area, new construction costs range from $175 to $300+ per square foot depending on location, finishes, and complexity. A 2,400 square foot home with mid-range finishes typically costs $420,000 to $550,000 to build, not including the lot. Waterfront builds, custom designs, and high-end finishes can push costs to $350-$500 per square foot. These numbers do not include the lot, impact fees, or site work (which can add $20,000 to $80,000+).

What is a draw schedule and how do disbursements work?

A draw schedule divides the construction loan into 5-7 payments (draws) tied to completion milestones. Typical milestones are: foundation pour, framing complete, dry-in (roof and windows installed), mechanical rough-in (plumbing, electrical, HVAC), drywall and interior finishes, and final inspection. Before each draw, a third-party inspector verifies the work is complete and the lender releases funds directly to the builder.

Can I be my own general contractor on a construction loan?

Most construction lenders in Florida require a licensed general contractor (CGC or CBC) and will not approve owner-builder construction loans. The risk is too high for the lender without a licensed, insured professional managing the project. A few portfolio lenders and credit unions offer owner-builder programs, but they typically require 30%+ down payment and extensive documentation of your construction experience.

What happens if construction goes over budget?

Cost overruns are the borrower's responsibility unless the builder has a fixed-price contract. With a cost-plus contract, the lender may require a contingency reserve (typically 5-10% of the construction cost) built into the loan. If costs exceed the loan amount and contingency, you will need to bring additional cash to cover the difference. A fixed-price contract with an experienced builder is the best protection against overruns.

Do I need to own the lot before getting a construction loan?

No. Most construction-to-permanent lenders in Florida will finance the lot purchase as part of the construction loan. If you already own the lot free and clear, its appraised value counts toward your down payment — a $100,000 lot on a $500,000 total project effectively gives you 20% equity from the start. If you have an existing lot loan, the construction loan typically pays it off at closing.

Insider Tips from Barrett Henry

Vet your builder like you are hiring a business partner — because you are. Check their Florida DBPR license status online, ask for 5+ references from homes completed in the last 2 years, visit their active job sites, and review their standard contract with a real estate attorney before signing. A bad builder can turn a dream home into a financial nightmare. Barrett Henry at (813) 733-7907 can recommend builders with proven track records in Tampa Bay.

Build in a 10% contingency on your construction budget, even with a fixed-price contract. Change orders happen — you will want to upgrade the owners suite tile, add a gas line for the outdoor kitchen, or discover the lot needs additional fill dirt. Having a 10% cushion financed into the loan means these changes do not come out of your emergency fund.

Pay close attention to Florida impact fees, which vary dramatically by county and can add $15,000 to $40,000+ to your project cost. Hillsborough, Pasco, and Polk counties all assess impact fees for transportation, water, sewer, schools, and parks. Your builder should include these in the total project estimate, but some quotes exclude them — always ask.

Request a single-close CTP loan with a float-down option. This lets you lock your permanent mortgage rate at closing (protecting you if rates rise during the 6-12 month build) while also giving you the option to take a lower rate if rates drop by a specified amount (typically 0.25-0.50%) before the construction-to-permanent conversion. Not all lenders offer this, so ask specifically.

Questions About Construction Loans in Florida?

Barrett Henry can connect you with trusted lenders and guide you through every step. Call (813) 733-7907 or fill out the form below.