Construction Loans in Austin, Texas
Build your dream home in the Austin area with one-time close construction loans. Single closing, one rate lock, and interest-only payments during construction.
How Construction Loans Work
Building a custom home requires specialized financing. Unlike a standard mortgage that funds a completed property, a construction loan releases funds in stages — called draws — as your builder completes milestones like the foundation, framing, roofing, and interior finishes.
During the construction phase (typically 8-14 months), you make interest-only payments on the amount that has been drawn. Once construction is complete, the loan either converts automatically to a permanent mortgage (one-time close) or you close on a separate permanent loan (two-time close).
Building in Austin
Austin and its surrounding communities offer outstanding options for custom home construction. From Hill Country acreage in Dripping Springs, Bee Cave, and Spicewood to established neighborhoods in Westlake, Lakeway, and Georgetown, there are build sites for every vision and budget. The region's custom home builders range from production builders to full-custom architects building one-of-a-kind homes.
Construction Loan Options
One-Time Close (OTC)
The most popular option. One application, one closing, one set of fees. Your rate locks before construction begins, and the loan automatically converts to a permanent 15 or 30-year mortgage when building is done.
Two-Time Close
Separate closings for construction and permanent financing. More flexibility to shop rates at completion, but two sets of closing costs. Can make sense if you expect rates to drop during the build.
FHA Construction (OTC)
Build with just 3.5% down using an FHA one-time close construction loan. Lower credit requirements (640+) and the down payment can be based on the lower of lot + construction cost or appraised value.
VA Construction (OTC)
Eligible veterans can build with 0% down using a VA one-time close construction loan. No mortgage insurance. The builder must be VA-approved or meet lender requirements.
Lot / Land Loans
Finance the purchase of a building lot before you are ready to build. Typically 20-30% down with terms of 5-15 years. Lot equity applies toward your construction loan down payment when you are ready to build.
Renovation / Rehab
For major renovations that approach new construction scope. FHA 203(k), conventional HomeStyle, and portfolio renovation loans fund both the purchase and the renovation in a single loan.
Construction Loan Requirements
Down Payment
- Conventional OTC: 10-20% of total project cost (land + construction)
- FHA OTC: 3.5% down
- VA OTC: 0% down for eligible veterans
- Lot loan: 20-30% down
If you already own the lot, your equity typically counts toward the down payment requirement.
Credit Score
Conventional construction loans require 680+ (best rates at 720+). FHA construction loans start at 640. VA construction loans typically require 620-640+.
Builder Requirements
Your builder must be a licensed general contractor with a minimum 2-3 years of experience, appropriate liability and builder's risk insurance, and a track record of completed projects. The lender will review the builder's credentials, financial stability, and project portfolio.
Plans and Specs
Complete architectural plans, specifications, and a detailed line-item budget are required before closing. The lender's appraiser will value the completed project based on these plans and comparable sales.
Construction Timeline
Standard construction periods are 12 months, with 6-month extensions available. Interest-only payments are based on the drawn amount, so your payments start small and increase as construction progresses.
Construction Loan FAQ
Funds are released in stages (draws) as your builder completes construction milestones. During building, you make interest-only payments on the drawn amount. Once complete, the loan converts to a standard mortgage (one-time close) or you refinance into permanent financing (two-time close).
A one-time close combines construction and permanent financing into one loan with one closing and one set of fees. Your rate locks before construction begins, and the loan automatically converts to a 15 or 30-year mortgage when building is done — saving thousands in closing costs.
Conventional: 10-20% of total project cost. FHA: 3.5%. VA: 0%. If you already own the lot, your equity counts toward the down payment. Total project cost includes land, construction, permits, and fees.
Most lenders require a licensed general contractor with 2-3+ years of experience and proper insurance. Some portfolio lenders allow owner-builders with construction experience, but this is uncommon. The lender needs confidence the project will finish on time and on budget.
Custom home construction in Austin typically takes 8-14 months depending on size, complexity, and site conditions. Construction loans usually include a 12-month build period with 6-month extensions available if needed.
Explore Other Loan Programs
Helpful articles: How Much House Can I Afford? · Closing Costs in Texas · Mortgage Pre-Approval Guide
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