New Construction Home Loans in DC, Maryland & Virginia: One-Time Close vs Two-Time Close

Building a new home — or buying one that is not yet built — requires a different kind of financing than purchasing an existing house. Standard purchase mortgages are underwritten against a property that already exists and has been appraised. A construction loan finances a property that is still being built, which means the lender is extending credit based on plans, permits, and projected value rather than a completed home. In the DC, Maryland, and Virginia market, where new construction communities are active in Northern Virginia, the Baltimore-Washington corridor, and suburban Maryland, understanding how construction financing works can be the difference between securing your dream home and losing it to a cash buyer.

The Two Types of Construction Financing

There are two primary structures for financing a new build: the one-time close (also called a construction-to-permanent loan) and the two-time close (a standalone construction loan that converts to a separate permanent mortgage). Both accomplish the same goal but involve different processes, costs, and risks.

One-Time Close Construction Loan

A one-time close loan combines the construction financing and the permanent mortgage into a single loan with a single closing. You apply once, get approved once, pay closing costs once, and lock your rate at the beginning of the process. During construction, you pay interest only on funds that have been drawn. Once the home is complete and the certificate of occupancy is issued, the loan automatically converts to a standard amortizing mortgage — no second closing, no second round of underwriting, no risk of rate changes before the permanent loan funds.

Two-Time Close Construction Loan

A two-time close involves two separate transactions. First, you close on a short-term construction loan — typically 6 to 12 months — that funds draws as construction progresses. When the home is complete, that loan is paid off and replaced by a new permanent mortgage, which requires a second round of full underwriting, a second appraisal, and second closing costs. The advantage is flexibility: you can shop for the best permanent mortgage rate once construction is complete rather than locking in advance. The disadvantage is cost, complexity, and the risk that your financial situation or the rate environment changes between closings.

FHA and VA One-Time Close Options

One-time close loans are available not just for conventional borrowers but also through FHA and VA programs — a significant advantage for first-time buyers and veterans who want to build rather than buy an existing home.

FHA One-Time Close

The FHA one-time close construction loan allows a down payment as low as 3.5% for borrowers with a 580 or higher credit score, making new construction accessible without a large cash reserve. FHA loan limits apply — in high-cost areas of the DMV such as DC, Montgomery County, and Northern Virginia, the 2026 limit for a single-family home is $1,149,825, which covers the majority of new construction projects in the region. The builder must be FHA-approved, and the home must meet FHA minimum property standards at completion.

VA One-Time Close

Veterans can use their VA loan benefit to finance ground-up construction through a VA one-time close loan with no down payment required. The VA does not set a maximum loan amount, though lenders apply their own limits. As with all VA loans, there is no mortgage insurance premium, which keeps monthly payments lower compared to FHA construction financing. The builder must meet VA builder requirements, and the property must pass VA appraisal standards.

How Construction Draws Work

Construction loans do not disburse the full loan amount at closing. Instead, funds are released in stages — called draws — as specific milestones are reached: foundation poured, framing complete, rough mechanicals (plumbing, electric, HVAC) installed, drywall up, and final completion. Each draw typically requires an inspection to verify the work is done before money is released. During construction, you pay interest only on the amount that has been drawn, not on the full loan balance. This keeps carrying costs manageable while the home is being built.

Buying a New Build from a Builder: How It Differs

There is an important distinction between ground-up custom construction (where you hire a builder and oversee the process) and buying a spec home or a to-be-built home from a production builder like NV Homes, Toll Brothers, or Ryan Homes. In the second scenario, the builder is the developer — they have their own construction financing and are simply selling you a completed or partially completed unit. You apply for a standard purchase mortgage, not a construction loan. The builder often has a preferred lender they push heavily with rate concessions or closing cost contributions. You are not required to use their lender, and comparing your own financing is always worth doing — the incentives may or may not offset a less competitive rate.

Qualifying for a Construction Loan in the DMV

Construction loans have stricter qualifying standards than standard purchase mortgages in most cases. Lenders are extending credit for a property that does not yet exist, which increases their risk. Generally, you should expect:

• Credit score: 620 minimum for most conventional construction programs; 580 for FHA one-time close
• Down payment: 5%–20% for conventional; 3.5% for FHA; 0% for VA
• Reserves: Many lenders require 6–12 months of mortgage payments in savings after closing
• Detailed builder contract: Signed contract with your builder, including project scope, timeline, and fixed price
• Approved builder: Builder must meet lender requirements and carry proper licensing and insurance
• Appraised value: Lender orders a subject-to-completion appraisal based on plans and comparable sales

Construction Timeline and Rate Lock Considerations

New construction timelines in the DMV vary considerably — a production builder might deliver in 6–9 months, while a custom ground-up build can take 12–18 months or longer. When locking a rate for a one-time close loan, you are committing to a rate far in advance of when you will actually be making mortgage payments. Some lenders offer extended rate locks of 9–12 months for construction loans, often with a float-down option that allows you to take a lower rate if the market improves before closing. These features typically come with an upfront fee but can provide valuable protection in volatile rate environments.

Bottom Line

New construction financing is more complex than a standard purchase, but it opens access to homes built to your specifications in communities where existing inventory is scarce. In the DC metro area, where resale inventory remains limited and new communities continue to develop in Northern Virginia, suburban Maryland, and the Baltimore corridor, understanding your construction loan options gives you a real competitive advantage. Whether you are pursuing a ground-up custom build or a to-be-built home from a production builder, a conversation with a mortgage broker before you sign a contract can prevent costly surprises.