Quick answer
It depends on the loan. Eligible veterans can build with no down payment on a VA one-time-close construction loan. Some conventional one-time-close programs allow as little as 5% down.
Bank construction loans and raw-land loans usually ask for more, often 15% to 25% for land alone. If you already own the lot, its equity can count toward the down payment.
Program figures on this page were verified in . Construction programs are offered by a limited number of lenders, and terms vary. Program terms and eligibility are subject to VA, Fannie Mae and lender guidelines and may change.
At a glance: down payment to build
- VA one-time close: 0% down for eligible veterans; few lenders offer it
- Conventional one-time close: as little as 5% down
- Own the lot? Its equity can count toward the down payment
- When it’s due: At the construction loan closing, before the build starts
How is a construction loan different from a regular mortgage?
A construction loan pays for a house that doesn’t exist yet, so the lender pays out the money in stages, called draws, as the builder finishes each phase. An inspector or appraiser confirms the work before each draw. Once the house is finished, the loan becomes, or is paid off by, a regular mortgage.
| Buying an existing home | Building with a construction loan | |
|---|---|---|
| How funds are paid | Lump sum at closing | Draws as construction milestones are completed |
| Appraisal | Current market value | “As completed” value from the plans and specifications, plus inspections during the build |
| Payments during the build | Not applicable | Often interest-only on the amount drawn; none on VA one-time close |
| Extra parties | Seller, agents, title | Builder or general contractor, plans, budget, draw schedule |
| Closings | One | One (one-time close) or two (construction loan, then a separate mortgage) |
A one-time close (construction-to-permanent) loan has one application, one approval and one set of closing costs. A two-time close means paying off a short-term construction loan with a new mortgage at the end, which means qualifying again at that point.
How much down payment does each construction loan require?
| Loan | Minimum down payment | Who it fits |
|---|---|---|
| VA one-time close | 0% | Eligible veterans and service members; VA funding fee usually financed, waived for many disabled veterans |
| Conventional one-time close | As little as 5% | Primary homes; Fannie Mae’s single-closing program allows up to 95% LTV |
| Bank portfolio construction loan | Set by each bank, often higher | Custom terms; may need a second closing for the permanent loan |
| Raw land only, no build yet | Often 15%–25% | Buyers who want to buy the land now and build later |
Program terms and eligibility are subject to VA, Fannie Mae and lender guidelines and may change. Not every lender offers every construction program; lenders can set stricter requirements. See Fannie Mae Selling Guide B5-3.1-02.
What does this look like on a $350,000 build in Robertson County?
Take an illustrative project with a $70,000 lot and a $280,000 contract to build, for a total cost of $350,000:
| Loan | Down payment | Base loan amount |
|---|---|---|
| VA one-time close (0%) | $0 | $350,000, plus the funding fee if it applies |
| Conventional one-time close (5%) | $17,500 | $332,500 |
| Bank loan at 20% down | $70,000 | $280,000 |
Illustrative example only. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Excludes closing costs and builder deposits. Loans are generally based on the lower of total cost or the “as completed” appraised value.
Can land you already own count as your down payment?
Often, yes. If you own the lot, many construction programs treat its value as equity in the project. In the example above, owning a $70,000 lot free and clear is 20% of the $350,000 total, which can cover the down payment on most programs with no extra cash.
- On Fannie Mae’s single-closing program, a borrower who already owns the lot closes as a limited cash-out refinance, and the loan-to-value ratio uses the “as completed” value of the land and the house.
- If you still owe money on the land, the construction loan usually pays off that balance, and only your equity counts.
- Recently purchased land may be valued at what you paid for it rather than at a higher appraisal. Rules differ by program and lender.
When is the down payment due on new construction?
- Builder deposit: some builders ask for a deposit when you sign the construction contract. Get in writing how it is credited.
- At the construction loan closing: your down payment and closing costs are due here, before the first draw. On a one-time close, this is your only closing.
- During the build: change orders and upgrades beyond the approved budget are usually paid in cash as they happen, so keep a reserve.
- At completion: on a two-time close, a second set of closing costs comes due when the permanent mortgage closes.
What else do you need cash for besides the down payment?
- Closing costs, including Tennessee’s transfer tax on the land purchase and mortgage tax on the loan.
- Plans, permits, a survey and soil or perc tests for septic, if the lender or the county requires them before closing.
- A contingency reserve for cost overruns. Many lenders build one into the budget; extra cash on hand still helps.
- Rent or your current mortgage during construction. Lenders count those payments when they qualify you.
Construction down payment FAQ
Do you need 20% down to build a house?
Not always. 20% is common on bank portfolio construction loans, but VA one-time-close loans can require 0% for eligible veterans, and some conventional one-time-close programs start at 5%. Program terms are subject to agency and lender guidelines and may change.
How much down do you need for a land loan?
Buying raw land with no immediate plan to build usually takes a larger down payment, often 15% to 25% or more, set by the bank. If you plan to build right away, a construction-to-permanent loan that includes the lot can need far less down.
Do you make payments while the house is being built?
On most construction loans, yes: interest-only payments on the amount drawn so far. On a VA one-time-close loan, the veteran typically makes no payments during construction, and the interest is added to the loan instead. Full principal-and-interest payments start after completion.
How long can construction take?
Each program sets limits. Fannie Mae’s single-closing program allows no single construction period over 12 months and no more than 18 months in total. Ask your builder for a realistic schedule, and leave room for weather and inspections.
Can I be my own builder?
Most government and conventional construction programs require a licensed general contractor that the lender approves. Owner-builder loans exist but are rare, and they usually require a larger down payment and building experience.
Where these figures come from
| Figure | Source | As of |
|---|---|---|
| Conventional single-close rules, 95% LTV, construction periods | Fannie Mae Selling Guide B5-3.1-02 and Eligibility Matrix | Retrieved Oct 26, 2026 |
| VA construction and funding fee | VA, Funding fee and closing costs | Retrieved Oct 26, 2026 |
| Land-loan down payments; VA construction payments | Christopher Armantrout on WSGI One Street Over | Mar 26, 2026 |
Related guides
- Construction loans with Valor Mortgage.
- VA loans and conventional loans.
- New and custom home builders in Springfield, TN.
- Closing costs vs. down payments.
- Robertson County mortgage guide.
- About Christopher Armantrout, the licensed originator who wrote this page.
Planning to build? Talk to Valor Mortgage first.
The right construction loan depends on whether you own the land, who your builder is, and whether you are eligible for VA. Before you sign a lot contract or a build contract, I’ll show you what each option would need from you in cash, anywhere in Tennessee.
Call me at (615) 671-9178. That’s the fastest way to get a straight answer on what you’d qualify for and what your construction loan would actually need from you in cash.
If it’s after hours, grab a time on my calendar. Pick a slot that works and I’ll call you then.
If your life is too chaotic for a phone call right now — I understand — start an application and I’ll review it and reach out with a plan.
Valor Mortgage, LLC · Christopher Armantrout, Mortgage Loan Originator, NMLS #1210804 · Valor Mortgage, LLC is powered by Encore Lending Group, LLC, NMLS #1249911 · Licensed in Tennessee · Equal Housing Opportunity
724 S Main St, Springfield, TN 37172 · (615) 671-9178 · christopher@valor.mortgage · NMLS Consumer Access
The dollar figures on this page are illustrative examples for general information only and are not an offer, a rate quote, or a commitment to lend. Actual interest rates and APRs vary based on loan program, borrower qualifications, property, market conditions and other factors. Program fees, limits and terms are set by the agencies named above and change without notice; all loans are subject to credit approval, income verification and property appraisal. Not all applicants will qualify.