Search for a construction loan in Jacksonville and you will mostly find hard-money and private lenders. That is because residential construction-to-permanent financing — the kind for a house you are going to live in — is barely represented in those results. It is a different product with different protections.
The Distinction That Actually Matters
A hard-money construction loan is generally written as a business-purpose loan. Under federal regulation, business-purpose credit is exempt from Regulation Z. That means the Ability-to-Repay rule does not apply to it, TILA's consumer disclosures do not apply to it, and Regulation Z's restrictions on prepayment penalties do not apply to it. It is typically short term and ends in a balloon, so you have to refinance out of it — a second closing, new costs, a new approval and whatever rate exists on that future day.
A construction-to-permanent loan for a home you will occupy is a consumer mortgage. It carries all of those protections, and in a single-close structure it converts to a permanent 30-year mortgage with no second closing and no requalification.
Both are legitimate tools. They solve different problems. If you are building your own home, the second one is almost certainly what you want.
One-Time Close vs Two-Time Close
Single-close means one closing, one set of costs, one approval. The loan funds construction in draws and then converts to permanent financing. On a conventional single-close, the construction period cannot exceed 18 months total, with no single period longer than 12 months. At conversion, only four things can be modified: the interest rate, the loan amount, the loan term, and the amortization type.
Two-close means a construction loan first, then a separate permanent loan afterward. That second loan is classified as a refinance, which is the practical penalty — refinance loan-to-value limits are lower than purchase limits, and a cash-out version requires you to have held title to the lot for at least six months. You also pay closing costs twice and get requalified at the end.
Unless something specific pushes you toward two closings, single-close is usually the better structure.
How the Down Payment Is Calculated
This trips up almost everyone, and it is worth understanding before you fall in love with a plan.
On a single-close purchase, your loan-to-value is measured against the lesser of two numbers: your total cost, meaning the lot price plus construction cost, or the "as completed" appraised value.
So if your build costs $500,000 all-in and the as-completed appraisal comes back at $560,000, that extra $60,000 is instant equity — but it does not reduce your required down payment, because the lesser-of test governs. Good news for your balance sheet, no help with cash to close. Plan accordingly.
Government Options
USDA has the best-documented single-close construction program of the three, and much of Clay and Nassau County qualifies. It finances the lot, hard costs, soft costs, landscaping, a contingency reserve capped at 10%, and up to 12 months of payment reserves during construction. The rate must be fixed at closing before construction begins — adjustable rates during construction are not allowed. Builders must have at least two years of homebuilding experience, appropriate state licensing, and a minimum of $500,000 in commercial general liability insurance. A contractor building his or her own residence is not eligible.
VA offers construction financing, potentially with no down payment. Funds go into escrow and disburse at milestones with your written approval, and VA will not issue its guaranty until a clear final compliance inspection is received. Being straight with you: this product is genuinely hard to find. Many lenders do not offer it, and veterans routinely report difficulty. We will tell you honestly whether we can place it. Construction loans use the same funding fee table as purchases, and equity in the land can count as your down payment for determining the fee tier.
FHA has construction-to-permanent and building-on-own-land programs. One correction worth making: FHA eliminated the ten-year protection plan requirement in 2019. Pages still listing it are out of date. What FHA requires now is the Warranty of Completion of Construction executed by builder and buyer, plus your one-year warranty against defects in equipment, material or workmanship.
Your Builder Has to Qualify Too
On USDA the builder standards are published — two years of experience, licensing, and that $500,000 liability policy. On conventional loans there is no Fannie Mae builder rule at all, which means every builder-approval checklist you encounter is that particular lender's overlay: financials, references, licensing, insurance, and a record of completed projects.
Practically, this means the builder you choose can determine which lenders will finance you. Bring us the builder early. Finding out at underwriting that your builder cannot be approved is an expensive way to learn this.
Building Around Jacksonville
Most new construction in Northeast Florida is builder-financed production housing, where the builder carries the construction risk and you simply buy the finished home — often with pressure to use their preferred lender. Our Nassau County page covers how to compare that offer honestly.
Construction-to-permanent is for the other situation: you own or are buying a lot and building a custom home. That is common in western Clay County, rural St. Johns, Nassau County outside the Yulee corridor, and infill lots in Ortega, Avondale and San Marco.
If you are building in Clay or Nassau, ask us about USDA first — the eligible boundaries reach closer in than most people expect, and it is the strongest construction program available. See USDA loans or renovation loans if you are buying something existing and reworking it.
Start With a Conversation
Tell us where the lot is, roughly what the build costs, who the builder is, and whether you already own the land. We will tell you which programs fit and what your cash to close actually looks like. Check today's rates to start.
Construction Loan Questions
What is the difference between a construction loan and a hard money loan?
A hard-money construction loan is typically a business-purpose loan, which is exempt from Regulation Z — so the Ability-to-Repay rule, TILA disclosures and prepayment-penalty restrictions do not apply. It is short term and ends in a balloon, requiring a separate refinance. A construction-to-permanent loan for a home you will occupy is a consumer mortgage with all of those protections, and in a single-close structure it converts to permanent financing with no second closing.
Can I get a construction loan with no money down?
Potentially with VA, which allows construction financing with no down payment for eligible veterans, though the product is offered by relatively few lenders. USDA single-close construction is also a 100% financing program in eligible areas, which includes much of Clay and Nassau County.
How long can construction take?
On a conventional single-close, the construction period cannot exceed 18 months in total, and no single period may run longer than 12 months. Builds expected to run past 18 months have to use a two-closing structure.
Is my interest rate locked before construction starts?
It depends on the program. USDA requires a fixed rate set at closing before construction begins. On a conventional single-close, the interest rate is one of the four terms that may be modified when the loan converts to permanent financing, so the structure anticipates it can change. Extended locks and float-down options are lender features rather than program rules.
Does my builder have to be approved?
Yes. USDA publishes its standards: two years of homebuilding experience, state licensing where required, and at least $500,000 in commercial general liability insurance, and a contractor may not build their own residence. Conventional lenders each set their own builder-approval requirements, so the builder you choose can affect which lenders will finance the project.
All figures are estimates based on information provided and are not a commitment to lend. Program guidelines apply and are subject to change; individual lenders may impose stricter requirements. All loans subject to credit approval. North Star Mortgage Network, Inc., Company NMLS #356789 · Nathan Young NMLS #325206 · 12058 San Jose Blvd, Suite 404, Jacksonville, FL 32223 · 904-880-6741. Equal Housing Lender.
