Couple planning their dream home in Nevada.

Using a Construction Loan to Build a Home in Nevada

Q: What is a one-time close construction-to-permanent loan?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: What are the main advantages of a single-close construction loan compared to a two-loan process?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: How does a lender qualify an applicant for a home that is not yet built?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: What is the typical down payment needed to build a home?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: How does the lender pay the builder during the construction phase?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: Will I have to make full mortgage payments while my home is being constructed?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: What is a contingency reserve and what happens to it if it is not used?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

June 22, 2026

Specialized In Jumbo Loans, Investor Loans, DSCR Loans, Non-QM Financing, Commercial Mortgages, and Tax-Informed Lending Strategies

Published By

David Ghazaryan

Owner / Broker / Banker

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(702) 766-3744

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TL;DR

Streamlined Financing: A one-time close construction loan bundles the financing for land purchase, the building process, and the final mortgage into a single transaction. This simplifies the process by requiring only one application, one underwriting process, and one set of closing costs.
Unique Qualification: Lenders qualify you based on the home’s projected future value, or ‘as-completed’ value, alongside a thorough review of your finances and your chosen builder’s credentials. This ensures you can afford the final home and that the project is viable.
Controlled Payouts: To protect all parties, the lender pays the builder in stages through a pre-approved draw schedule. Funds are only released after an inspector verifies that specific construction milestones, such as the foundation or framing, have been completed to standard.
Borrower Payments: During the construction phase, your payments are interest-only and are calculated solely on the funds that have been disbursed to the builder. This keeps your monthly obligation lower while the home is being built.

What Is a Construction-to-Permanent Home Loan?

Finding the perfect pre-built home in the competitive Las Vegas market can be a challenge. For many, the solution is to build a custom home that meets their exact specifications. A construction-to-permanent loan, often called a 'one-time close' or 'single-close' loan, is a specialized financial product designed for this purpose. It combines financing for the land purchase, construction, and the final mortgage into one single transaction with one closing.

This is fundamentally different from a traditional 'two-time close' loan, which involves securing a short-term loan for construction and then refinancing into a permanent mortgage after the home is built. The one-time close loan offers significant advantages:

One Set of Closing Costs: You only go through the underwriting and closing process once, saving you thousands in fees compared to two separate loan transactions.
Rate Security: Your permanent mortgage interest rate is locked in before the first shovel hits the ground, protecting you from potential rate hikes during the 9-12 month construction period.
Streamlined Process: You work with one lender from start to finish, which simplifies communication and paperwork.

This loan structure provides the capital needed to buy a lot in a community like Henderson, hire an architect, and fund the entire build until you receive the keys. Once construction is complete and the final inspection is passed, the loan automatically converts into a standard, permanent mortgage without any additional closing or re-qualification.

How Is Your Income Qualified for a Home That Isn't Built?

Qualifying for a construction-to-permanent loan is more complex than for a standard mortgage because the lender is underwriting a home that doesn't exist yet. The process is based on the projected value of the finished property, often called the 'as-completed' value.

Here’s how lenders assess your application:

Future Appraised Value: A licensed appraiser evaluates your architectural plans, building material specifications, and the lot's value to determine what the home will be worth upon completion. The loan amount is based on a percentage of this future value, known as the loan-to-value (LTV) ratio.
Standard Income and Credit Review: The lender verifies your financial stability just as they would for a regular mortgage. This includes reviewing your credit score, employment history, tax returns, W-2s, and bank statements. Your debt-to-income (DTI) ratio must meet the lender’s guidelines for the final mortgage payment.
Cash Reserves: Lenders will want to see that you have sufficient cash reserves to cover potential cost overruns and to make interest-only payments during the construction phase.

Architectural plans for a custom home build being reviewed for a construction loan.

Essentially, the lender qualifies you based on your ability to afford the final mortgage payment on the completed home, even though you will only be making smaller, interest-only payments during the build itself.

What Is the Typical Down Payment to Build a Home in Las Vegas?

The down payment for a construction loan is calculated based on the total project cost, which includes the price of the land plus the cost of construction. While requirements vary by lender and loan program, you can generally expect the following:

Conventional Loans: Most conventional construction-to-permanent loans require a down payment between 10% and 20%. For a $800,000 project in a desirable North Las Vegas neighborhood, this would mean a down payment of $80,000 to $160,000.
Government-Backed Loans: FHA and VA construction loans are also available. A VA construction loan may allow for 0% down for eligible veterans, while an FHA loan requires as little as 3.5% down. However, these programs often have stricter builder approval processes and lower loan limits, which may not be sufficient for a fully custom home in higher-cost areas. (The data, information, or policy mentioned here may vary over time.)

If you already own the land, you’re in a great position. The equity in your land can often be used to satisfy all or part of the down payment requirement. For example, if your land is valued at $150,000 and the down payment needed is $100,000, your land equity fully covers it.

How Does the Lender Pay the Builder During Construction?

A lender won’t simply give your builder a check for the full loan amount upfront. To protect their investment and ensure the project stays on track, funds are disbursed through a structured system called a draw schedule. This is a pre-determined payment plan tied to specific construction milestones.

Before construction begins, you, your builder, and the lender agree on this schedule. As the builder completes each phase, they request a 'draw'. The lender then sends an inspector to the site to verify the work is complete and meets quality standards. Once approved, the lender releases the funds for that phase directly to the builder.

Sample Draw Schedule Milestones

Draw 1: Foundation poured and cured.
Draw 2: Framing, sheathing, and roofing completed.
Draw 3: Windows, doors, and exterior siding installed.
Draw 4: Rough plumbing, electrical, and HVAC systems installed.
Draw 5: Insulation and drywall completed.
Draw 6: Interior finishes, flooring, cabinets, and fixtures installed.
Final Draw: Final inspection passed and Certificate of Occupancy issued.

Completed custom home financed with a construction-to-permanent loan.

This system ensures that work is paid for only after it is properly completed, protecting both you and the lender from unfinished projects or misused funds.

Do You Make Payments While the House Is Being Built?

Yes, but you won’t be making full principal and interest payments from day one. During the construction phase, you are only required to make interest-only payments. Furthermore, you only pay interest on the funds that have been disbursed to the builder so far.

For example, imagine your total construction loan is $750,000. After the first draw of $100,000 for the foundation, your monthly payment is calculated based only on that $100,000. As the builder completes more work and takes more draws, your monthly interest-only payment will gradually increase. This structure keeps payments affordable while you may still be paying rent or a mortgage on your current home.

Once the home is finished and the loan converts to its permanent phase, your payments will switch to the standard principal and interest structure you agreed to at closing.

How Lenders Vet and Approve a Custom Home Builder in Henderson

The lender is just as invested in your builder's reliability as you are. A builder who is inexperienced or financially unstable poses a significant risk to the project's completion. To mitigate this risk, every lender has a thorough builder approval or vetting process. Before approving your loan, the lender will require your chosen builder in Henderson or Las Vegas to provide:

License and Insurance: Proof of a valid contractor’s license in Nevada and sufficient general liability and workers' compensation insurance.
Financial Stability: The lender may review the builder’s business financials or request bank references to ensure they are solvent.
Proven Track Record: A portfolio of recently completed homes of a similar style, size, and price point to your project.
Supplier and Subcontractor References: Contact information for past clients and partners who can vouch for their work quality and payment history.
Detailed Project Plans: A complete set of architectural plans, a line-item budget, and a list of material specifications (specs).

It is critical to choose a builder who has experience specifically with financed custom home projects, as they will be familiar with the draw process and lender documentation requirements.

What Happens If Construction Costs Go Over Budget?

Cost overruns can happen due to rising material prices, unforeseen site issues, or changes you decide to make mid-project. To prepare for this, lenders require a contingency reserve to be built into the loan.

This reserve is typically 5% to 10% of the total construction cost. (The data, information, or policy mentioned here may vary over time.) For a $600,000 build, this would be an extra $30,000 to $60,000 held in reserve. These funds can be used to cover approved overages, ensuring the project can be completed without delays. If the contingency reserve is not used by the end of the build, the funds are applied directly to your loan's principal balance, reducing the total amount you owe.

Any costs that exceed the loan amount plus the contingency reserve become your responsibility to pay out-of-pocket. Careful planning and a detailed contract with your builder are the best ways to prevent significant budget issues.

Can You Lock Your Final Interest Rate Before the Build Begins?

Yes, and this is one of the most powerful benefits of a one-time close construction-to-permanent loan. Your interest rate for the permanent mortgage is locked in before construction starts. Given that building a custom home can take anywhere from 9 to 18 months, this feature provides crucial protection against a rising rate environment.

With a two-time close loan, you would have to re-qualify for a new mortgage after construction is finished, subjecting you to the interest rates available at that future time. Locking your rate upfront with a single-close loan provides peace of mind and budget certainty, allowing you to plan your long-term finances from day one. Building a home is a complex process, but financing it shouldn't be. If you're exploring a construction-to-permanent loan in Nevada, understanding your options and getting pre-qualified early is the best first step. Connect with a mortgage advisor who specializes in construction financing to review your project and create a clear financial blueprint.

If building a custom home in Nevada is your goal, securing the right financing is the foundational first step. Let our construction loan experts review your plans and provide a clear financial path forward. Feel free to Apply now and start the process.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.