Maryland Construction Loans

What a construction loan is — and what the names mean

A construction loan finances the building of a home that does not exist yet. That single fact drives everything that makes it different from an ordinary mortgage: there is no house to appraise, no house to inspect, and no house to lend against until somebody builds one.

The structure almost every Maryland buyer is actually looking for is a one-time close loan, and it goes by three names that all mean the same thing:

• One-Time Close — the marketing name, describing the single closing
• Single-close construction — the same idea, phrased differently
• Construction-to-permanent — the most literal description: a loan that begins as construction financing and ends as a permanent mortgage

All three describe one loan that covers the land, the construction and the permanent mortgage, closed once, before the first shovel goes in the ground. When the home is finished and the local jurisdiction issues the certificate of occupancy, the loan becomes your ordinary long-term mortgage without a second application.

The alternative is a two-time close: a short-term construction loan first, then a separate permanent mortgage you have to close — and qualify for — once the house is built. That comparison gets its own section below, because the difference is bigger than it sounds.

Maryland construction loan comparison

Four programs will finance land, construction and a permanent mortgage in one loan in Maryland. They differ more than most comparison charts suggest — particularly on occupancy, on what you can build, and on how long you have to build it.

The tables below split the comparison into the three things buyers actually decide on: the money, the project, and the fit.

The money

The project

The fit

Which construction loan may fit your situation?

No program is universally best. What decides it is your eligibility, where you are building, and what you are building — usually in that order.

Notice how many rows turn on eligibility and the project rather than on your credit score. That is the honest shape of construction lending, and it is why the sections below spend more time on land, builders and appraisals than on qualifying.

Maryland site issues that can stop or delay a build

Financing is rarely what kills a Maryland build. The lot is. A parcel advertised as a building lot is not automatically a lot you can finance, and the checks below happen at the county level long before an underwriter sees the file.

Septic and the perc test

If the lot is not on public sewer, it needs an approved on-site sewage disposal system. Maryland sets those rules in COMAR 26.04.02, and the Maryland Department of the Environment delegates the approving authority to your local health department. That local authority evaluates the site, supervises percolation testing and decides whether a system can be permitted there. Counties may apply requirements more stringent than the state minimum, never less.

Two consequences matter to a buyer. A failed site may not be buildable at all, at least not for the house you had in mind. And testing is seasonal — the regulations call for evaluation when the water table is at its highest — so a lot bought in a dry month can behave differently on paper than it does in February. Make your purchase contingent on septic approval rather than assuming it.

Water supply

No public water means a well, and the well is permitted through the same local approving authority. Yield, depth and placement relative to the septic field all affect siting, and the cost is part of your construction budget rather than an afterthought.

Chesapeake Bay Critical Area

Land within 1,000 feet of tidal waters or tidal wetlands sits in the Chesapeake Bay Critical Area, which includes a 100-foot Buffer measured landward from the shoreline, tidal wetlands or tributary streams. Development and land-disturbing activity there follow state criteria implemented through each county or town’s own Critical Area program, covering things like clearing, vegetation and impervious surface.

For a buyer this is a siting question, not a formality. It can determine where a house may go on the parcel, how large it can be, and what the approval timeline looks like. If any part of your lot is near tidal water, ask the local Critical Area contact before you go under contract.

Flood zone

Flood zone affects insurance cost, how the home has to be built and elevated, and what the lender will require. The FEMA Flood Map Service Center is the official source for the determination on a specific address. Check it before you buy, not after your builder has drawn plans.

Permits

Maryland applies one set of building codes statewide through the Maryland Building Performance Standards, but implementation and enforcement are local, and jurisdictions may amend most of those codes to local conditions. Your permits come from the county or municipality, and the Department of Labor publishes code contacts by county.

We are not going to publish a timeline per county, because those numbers move and vary by project. What you can do is call the permitting office for your specific jurisdiction while you are still in diligence and ask what the sequence and current turnaround look like. A construction loan is built around a completion window; a permit that takes longer than you assumed compresses everything after it.

One-Time Close vs Two-Time Close

This is the comparison that matters most, and it is worth understanding before you talk to any lender about building.

In the traditional two-time close arrangement you take a short-term construction loan, build the house, and then arrange a separate permanent mortgage to pay off the construction loan. Two loans. Two applications. Two underwriting reviews. Two closings. Two sets of costs — and, critically, two qualification events.

A one-time close collapses all of that into a single transaction that happens before construction begins.

The honest trade-off is the last row of the table. A two-time close lets you shop the permanent mortgage when the house is done. That flexibility is real — and so is the risk that comes with it. Which matters more depends on how stable your income and credit are, and on your appetite for rate uncertainty across a build cycle.

How a one-time close construction loan works

The general shape is the same across all four programs, even though the detail of each stage differs.

1. Get pre-approved first. Credit, income, assets and buying power reviewed, and the relevant limits identified. This comes before land, before plans, before a builder deposit — and on a construction loan that ordering matters more than on any other mortgage.
2. Establish your land situation. Buying a lot, already own one, paying off an existing lot loan, or receiving land from family. Each is handled differently and each changes the maths.
3. Select a builder. Licensed, insured, experienced, and willing to work inside a construction loan. Start this early; builder review is routinely the slowest item.
4. Finalise plans and specifications. Detailed enough for an appraiser and an underwriter to work from.
5. Establish the construction budget. A real line-item cost breakdown, not a per-square-foot estimate.
6. Builder and project approval. The lender reviews the builder, the contract, the plans and the budget together.
7. The appraisal. The proposed completed home is valued from the plans and specifications against comparable finished properties.
8. Underwriting. You and the project are reviewed together. Both have to clear.
9. One closing, before construction begins. All documents signed, permanent terms established, construction funds set aside in escrow.
10. Construction begins. Permits pulled and work proceeds.
11. Draws and inspections. Funds release to the builder in stages as verified work is completed.
12. Completion and certificate of occupancy. The jurisdiction confirms the home is finished and fit to occupy.
13. The permanent mortgage phase. The loan converts on the terms already established, and regular payments begin.

One thing holds everywhere: expect the front end to take longer than a resale purchase. Plans, builder review, appraisal and underwriting all have to line up before you close. Maryland permitting timelines vary considerably by jurisdiction and add to that. Nobody can promise you a universal closing timeline, so build the reality into your schedule rather than your optimism.

Land, construction and the permanent mortgage — the three pieces

Financed separately, building a home is two or three transactions with two or three sets of closing costs. A one-time close makes them one.

• The land — purchased at closing, or an existing lot loan paid off, or credited as equity if you already own it outright
• The construction — released to your builder in draws as verified work is completed, never as a lump sum
• The permanent mortgage — the long-term loan the whole thing becomes at completion

Beyond those three, a construction loan can usually carry more of the project than buyers expect. Depending on the program, financeable costs may include architectural and engineering fees, building permits, surveys, title updates, draw control and inspection fees, builder’s risk insurance, a contingency reserve, interim construction interest, and reasonable closing costs. USDA’s regulation is the most explicit and the most generous on this point, and even lists landscaping among eligible costs.

That matters practically: the professional fees and site costs that quietly drain a construction budget can often stay inside the loan rather than coming out of your savings.

What if I already own the land?

This is one of the most common questions in construction financing, and the answer is genuinely good news — with an important qualification.

Land you already own is an asset in the transaction, not an expense. You are not buying it again. Its value counts toward your equity position in the completed project, which can reduce or eliminate the cash you need to bring.

How much it helps depends on the program:

• FHA. HUD’s construction-to-permanent guidance provides for the required 3.5% cash investment or its equivalent in land equity when building on your own land. On many Maryland lots, the land covers the requirement entirely.
• Conventional. Owning the lot before the first construction advance makes the transaction a limited cash-out refinance, with loan-to-value measured against the as-completed appraised value of the lot and improvements together. Strong land equity can put a borrower below 80% and avoid mortgage insurance from the outset.
• VA. Land you own counts as equity toward the project. Because the VA funding fee steps down at 5% and 10% equity, a lot owned for years can move you into a lower fee bracket.
• USDA. Your equity in the lot works in your favour toward the overall project, and the lender documents your existing ownership as part of the file.

Two practical points that apply regardless of program. An existing lien on the lot has to be dealt with — it is generally paid off through the transaction, and the payoff comes out of the equity you were counting on. And the appraisal still governs: your land contributes to a finished value that an appraiser has to support, not to a number you have assigned it.

Land loan or construction loan?

These get confused constantly, and the distinction is simple once stated.

So if your plan is to buy a piece of Maryland ground now and build on it in three or five years, a construction loan is not the right tool and no lender will structure one for you. You would be looking at land financing now and construction financing later, as two separate transactions.

That is not a bad outcome — plenty of people buy land first. But it is worth knowing two things before you do:

• Buying the lot inside the construction loan is usually simpler and cheaper than buying it separately and refinancing it in later, because it is one transaction and one set of costs.
• A lot you buy today has to still work when you build. Zoning, utilities, percolation results, access and buildability all need to hold, and the loan program you eventually use will have its own property requirements.

If you are genuinely undecided, the useful sequence is to get the construction financing conversation first and let it tell you whether buying the land now is a good idea. That is the reverse of what most people do, and it is the reason the two checklists further down this page exist.

Compare Maryland construction loan options

Four one-time close structures are used in Maryland, and we can currently offer all four. That is worth saying plainly, because construction-to-permanent financing — government single-close products in particular — is generally offered by fewer lenders than standard purchase mortgages, and availability shifts.

Below is the short version of each. The detailed Maryland guide for each program covers the rules, limits and process in full.

FHA One-Time Close

Who it may fit: buyers whose credit is the limiting factor. Defining characteristic: a 3.5% minimum investment calculated on the total project rather than on a purchase price, with land you already own counted toward it. Practical limitation: the county loan limit caps the whole project more often than buyers expect, mortgage insurance applies, and HUD requires you to contract with a licensed general contractor rather than build it yourself. Primary residences only.

Read the Maryland FHA One-Time Close guide

VA One-Time Close

Who it may fit: eligible veterans and service members, especially those who already own the lot. Defining characteristic: no down payment with full entitlement and no monthly mortgage insurance, which is unmatched by the other three. Practical limitation: residual income is a real approval gate, the funding fee applies unless you are exempt, and the builder must satisfy VA requirements as well as the lender’s.

Read the Maryland VA One-Time Close guide

USDA One-Time Close

Who it may fit: income-eligible buyers building in a USDA-eligible part of Maryland. Defining characteristic: financing up to 100% of the project, land included, with no down payment. Practical limitation: two gates decide it before anything else — the lot has to sit in an eligible area and your household income has to fall within the limit — and the guarantee fee applies. Primary residences only.

Read the Maryland USDA One-Time Close guide

Conventional One-Time Close

Who it may fit: buyers with stronger credit or more cash, and anyone whose project exceeds what the government programs will cover. Defining characteristic: the widest range of property and occupancy options, with land equity applied to the down payment. Practical limitation: the down payment is larger than the government routes, private mortgage insurance applies below 20% equity though it can later be cancelled, and conforming limits still set a ceiling.

Read the Maryland Conventional One-Time Close guide

If you are not sure which applies, the comparison table above sets them side by side, and Maryland loan programs covers how these same four programs work on a completed home.

Builder requirements

On an ordinary purchase the lender never meets your builder. On a construction loan the builder is reviewed almost as carefully as you are — because the lender is financing an asset that does not exist yet, and the builder is the person who has to create it.

Registration and lender approval are two different gates. Maryland requires home builders doing business in the state to register with the Home Builder Registration Unit in the Attorney General’s Consumer Protection Division, and the Unit tells consumers to confirm that registration before signing a contract for a new home. You can check a builder yourself through the state’s Home Builder Registration lookup. Registration also brings the Home Builder Guaranty Fund into play, which exists so consumers can seek compensation for losses caused by a registered builder’s act or omission on a new home.

That is the legal floor, not the lender’s standard. A properly registered builder can still fail a construction lender’s review on experience, financial strength, insurance or references. Confirm both: that the builder is registered with the state, and that the lender financing your build will approve that specific builder, before money changes hands.

Read this before you sign a builder contract, because the order matters. Buyers routinely commit to a builder and then discover the builder cannot be approved, which puts them in the worst possible negotiating position.

Across the programs you should expect the lender to review:

• Licensing — appropriate for the work and the jurisdiction
• Insurance — general liability and, where applicable, workers’ compensation
• Experience — a track record of comparable completed projects
• Financial standing and references
• The construction contract, together with the plans, specifications, budget and draw schedule
• Permits and the construction timeline

Beyond those, the detailed approval criteria are lender policy rather than agency rule, and they differ between lenders. A capable builder with a good local reputation is not automatically an approved builder, and a builder who has never worked inside a construction loan may not have the documentation ready.

Maryland licensing and permits

Home improvement contracting is a licensed activity in Maryland, administered by the Maryland Home Improvement Commission within the Department of Labor, and new home builders are separately regulated by the state. Licensing status is verifiable, and it is worth verifying rather than assuming.

Permits are local. They are issued by the county or, inside an incorporated municipality, by the town or city — and a project inside a municipality may need approvals from both. Review times vary substantially across Maryland’s twenty-four jurisdictions, and that variation lands directly on your construction timeline. Nobody can quote you a statewide Maryland permit timeline; ask the specific jurisdiction and build the answer into your schedule at the planning stage.

Can I be my own builder?

Consumers ask this constantly, and the answer across all four programs is the same — but the source of the answer differs, and that matters if you are hoping to find a way around it.

So the practical answer is no on all four. On the conventional side that restriction is a product decision rather than an agency rule, which in principle leaves room for a lender to see it differently — but owner-builder construction financing is genuinely difficult to find, so treat it as a closed door unless a specific lender tells you otherwise in writing.

The reasoning is consistent across the programs, and it is worth understanding rather than resenting. Every draw is tied to verified work by an approved contractor carrying insurance. If the project stalls, someone has to be able to finish it — and on USDA the lender is formally responsible for doing so. Owner-built work has no licensed party standing behind it, no commercial liability coverage and no independent completion path.

If sweat equity is central to your plan, construction financing is not the right product, and it is far better to establish that before you own the land than after. Note also that a licensed Maryland builder wanting to build their own home faces the same restriction — the usual route is to contract with a separate licensed builder.

Plans, specifications and the construction budget

Construction financing requires the project to be defined before closing. That surprises people who expect to sort out details as they go, and it is the single biggest cultural difference between building and buying.

The reason is simple: the lender is underwriting a house nobody can look at, and the appraiser is valuing one. Both work entirely from paper. What that paper contains determines what you can borrow.

Expect to produce:

• Architectural plans for the home
• Specifications — the materials, finishes and features that will actually be installed
• A signed builder contract, fixed-price where the program requires it
• A line-item construction budget with labour and materials broken out — not a per-square-foot estimate
• Allowances clearly stated, for the items not yet selected
• Site work costed properly: grading, driveway, utility runs, well and septic, stormwater management
• Permits identified, with the issuing jurisdiction named
• A construction schedule that fits inside the program’s completion window
• A contingency approach agreed with your lender and builder
• A change-order process understood before you need it

Allowances deserve their own warning. An allowance is a placeholder for something not yet chosen — flooring, fixtures, appliances. Allowances set unrealistically low make a budget look affordable and then produce change orders when you make real selections. Ask your builder whether the allowances reflect what you actually intend to buy.

How the appraisal works when the home does not exist

This is the conceptual hurdle in construction lending, and it is worth understanding properly because it decides more than most buyers realise.

The appraiser produces an as-completed value — sometimes described as subject to completion — which is an opinion of what the finished property will be worth. It is developed from:

• The lot itself
• The plans and specifications
• The materials and features specified
• The construction contract and budget
• Comparable completed properties nearby

“Subject to completion” means exactly what it says: the value holds on the condition that the home is actually built to the plans that were reviewed. When construction finishes, a completion report confirms it — on the conventional side, a Form 1004D or an acceptable completion alternative.

Three consequences follow, and they apply on every program:

• Detailed plans produce better values. An appraiser can only credit what is documented. Vague specifications produce conservative numbers.
• Comparable sales govern. This is the real constraint on unusual builds — if nothing remotely like your house has sold nearby, the appraiser has little to work from.
• Proposed-construction appraisals take longer. Build the extra time into your schedule rather than discovering it.

Construction draws

You do not receive the construction money, and your builder is not paid up front. Funds sit in a construction escrow and are released in draws as verified work is completed, with an inspection confirming progress before each release.

That structure exists to protect you. A builder cannot be paid in full for work that has not been done, and someone independent is checking progress against the plan.

A typical draw schedule runs through recognisable milestones — foundation, framing, rough mechanicals, drywall and interior, then a final draw released after the completion inspection. Those milestones are illustrative rather than a fixed federal schedule; the actual schedule is set in your construction loan agreement and varies by lender and project. Title updates, lien checks and a retainage held back until completion are common features of the process.

One protection worth knowing about, because it is rarely mentioned: on a USDA file, if an unplanned change with you or the contractor prevents the home being completed, the lender remains responsible for completing the improvements to Rural Development’s satisfaction. You are not simply left with a half-built house and a loan.

Do you make payments while the home is being built?

Usually not — and this is one of the most valuable features of construction financing, because most people building a house are already paying rent or a mortgage somewhere else. Carrying both for a year is what puts building out of reach for a lot of families.

But “no payments during construction” is a structuring outcome rather than a universal rule, and the mechanism differs by program. This is one of the places where published guidance most often overstates the case.

The interest never disappears. Money is out the door and working from the first draw. Whether it is paid by a reserve inside your loan, carried by the builder inside the build cost, or billed to you monthly, you are paying it one way or another. What varies is whether it comes out of your monthly cash flow during construction.

When the permanent payment starts

Timing differs, and it is worth knowing rather than assuming. On the conventional product, amortization begins no later than the first day of the month following 60 days from the final inspection or issuance of the certificate of occupancy. USDA’s regulation allows the first regularly scheduled amortised payment to be postponed up to one year based on the construction period, and permits a reserve covering up to 12 months of principal, interest, taxes and insurance. On the FHA side the exact first-payment timing is a matter of program and servicing practice rather than a fixed rule.

USDA adds one detail people miss: its annual fee begins the month immediately following closing — during construction, not when you move in — and is not affected by the re-amortisation that happens when the build finishes.

Rate locks and your permanent rate

Because there is no permanent loan in force while the home is being built, market rates can move in either direction during construction. This is one of the genuine advantages of a single-close structure, and also one of the most oversold.

What is real: on a one-time close, your permanent rate is established at that single closing, before construction begins, rather than being whatever the market offers a year later. USDA states this as a rule — the rate for both the construction and the permanent loan is set when the rate is locked, and the lock must occur before closing. On the conventional product the mechanism is a capped permanent rate: you qualify at, lock and close at a capped rate, and at completion your permanent rate is set to the lower of the then-current offered rate or your cap. It can stay the same or move down; it cannot rise above the cap.

No interest rates or rate examples appear anywhere on this site. Rates move daily and depend on the market, the program and your profile. What matters before you choose a lender is understanding the structure, not a number that would be stale within weeks.

Cost overruns, change orders and contingency

Almost every build changes somewhere. The question is whether the change goes through the process or around it.

The starting position is firm: the construction budget is established before closing, the appraisal was developed from those plans and specifications, and the loan was underwritten against that budget. A significant change order or cost overrun generally requires lender approval, because it alters both.

• Upgrades you decide on after closing are the most common cause. A better kitchen package or an upgraded finish is a change order like any other.
• Genuine overruns — material price movement, site conditions, weather delays — work the same way.
• Large scope changes can affect the appraisal, because the as-completed value was set from the original plans.
• Approving a change order takes time, and on a program with a hard completion deadline, time is the resource you are shortest of.

Contingency reserves

A contingency reserve is money set aside inside the budget for what surfaces once work is under way. No single percentage applies across the four programs, and we do not publish one.

What our program research establishes: USDA’s regulation permits a contingency reserve up to a percentage the Agency specifies, and it is a financeable cost. On FHA it is not expressed as a single fixed percentage — construction lenders commonly require one, sized by lender and project. On the conventional product whether a reserve is required, and at what level, depends on the project rather than a published figure. VA lenders commonly require one in a range they set themselves.

The universal part is simpler than the percentages: a project budgeted with no headroom stalls the first time something unexpected turns up, and a mid-build change is slower and more expensive to resolve than a line item planned for in advance. Agree the contingency approach with your lender and builder before closing.

What you can build

The programs diverge sharply here, and a list from one lender’s website will mislead you about the others.

Modular and manufactured are not the same thing

This distinction matters more on a construction loan than almost anywhere else, because it changes which rules apply.

• Modular homes are built in sections to the same state and local building codes as site-built construction, with no permanent chassis, and assembled on a permanent foundation. All four programs treat them much like a stick-built house once set. This is the easier of the two.
• Manufactured homes are built on a permanent chassis to the federal HUD code, and carry their own rule set on every program — foundation certification, labels, real-property titling and, on conventional financing, a double-wide requirement.

If a manufactured home is your plan, confirm eligibility on the specific unit and the specific program early. We cover manufactured home financing in depth on our Maryland manufactured home loans hub.

Maryland considerations, loan limits and larger projects

The construction programs themselves are federal and work the same way in Garrett County as in Prince George’s. Four things genuinely vary in Maryland.

• Permitting is local, and the variation is real. Building permits are issued by the county or by the town or city inside an incorporated municipality, and a project inside a municipality may need both. Review times differ substantially across the twenty-four jurisdictions, and that variation lands directly on your completion window.
• Well and septic gate rural projects. Outside public water and sewer service areas you need a well permit and a septic permit, and the septic permit depends on a passing percolation test. These are issued through county health departments and they gate everything — you cannot build a house you cannot get water into or waste out of. On a raw lot, secure these before you close on the land if you possibly can.
• USDA eligibility is decided address by address. Eligible areas cover much of the Eastern Shore, Southern Maryland, Western Maryland and the outer edges of the central counties — which is also where buildable lots are most available.
• Loan limits vary within the state. Both the FHA county limits and the conforming limits are materially higher in the Washington-metro counties than elsewhere in Maryland. On a construction project the limit applies to land plus construction, which is why it binds more often here than on a purchase.

Can you use down payment assistance with a construction loan?

Our current construction loan options do not include down payment assistance. If assistance money is central to how you get to closing, that is worth knowing before you put a deposit on a lot.

The reason is structural rather than arbitrary. Assistance programs are written around a purchase: a seller, a settlement date, a finished house an appraiser can walk through. Construction financing closes before the house exists, funds in draws, and converts to permanent financing months later. Those two designs do not line up cleanly, and the Maryland Mortgage Program publishes its product line around purchase mortgages without a construction-to-permanent option.

That is a statement about what we can offer today and what the state program publishes, not a claim that no lender anywhere pairs assistance with construction. Some lenders build proprietary assistance into their own construction products. If you find one, confirm the terms in writing before you rely on it.

If you need assistance to buy, the practical route is a completed home rather than a build. Our Maryland down payment assistance guide covers the statewide and local options, and the Maryland Mortgage Program guide explains the state program those options usually run through. Both are written for purchase transactions.

What to do before you buy land

This is the most valuable section on the page. The single most common and most expensive construction-financing mistake in Maryland is committing to a lot before anyone has confirmed the financing works.

Land is the hardest part of a build to undo. A house can be redesigned. A builder can be replaced. A lot you have already bought with cash, on the wrong terms, in the wrong jurisdiction, or with site conditions nobody priced, is a problem you own.

Before you buy a Maryland lot for a future home, establish:

• Your construction financing first. Get qualified before you shop. This is the step people skip and the one that matters most.
• The likely loan program. Eligibility, occupancy and what you intend to build narrow it quickly.
• The total project budget — land plus construction plus closing costs plus contingency, as one number rather than three.
• Whether the lot price is realistic against comparable lots, and how it fits inside that total.
• Utilities. Public water and sewer, or the alternative.
• Well and septic. Permits are issued through the county health department, and the septic permit depends on a passing percolation test. A lot that fails may not be buildable in the form you intended.
• Site development costs — grading, driveway, utility runs, stormwater management, tree clearing. Routinely underestimated, and routinely the reason projects run out of money.
• Access to the property, including any easements.
• Zoning and permitted use, confirmed with the county or municipality in writing.
• Buildability — setbacks, slope, floodplain, wetlands and any overlay that adds review.
• Permits and the realistic timeline in that specific jurisdiction.
• Survey and boundary position.
• Environmental considerations where they apply to the parcel.
• Builder availability in the area, for the trades you need.
• The applicable loan limit — the FHA county limit or the conforming limit — against your total.
• Appraisal feasibility. Are there comparable completed homes nearby to support the value you will need?

What to do before you sign a builder contract

The second checkpoint, and the one that decides whether a project structure can actually be financed. Buyers routinely commit to a builder and a set of plans, and then discover the structure does not fit the loan.

• Have your financing reviewed against the actual project — not a general pre-approval, but this build, on this lot.
• Confirm the builder can be approved. Licensing, insurance, experience and financial review. Ask your lender to start this before you sign.
• Ask whether the builder has worked inside a construction loan before. Not disqualifying, but it changes the timeline.
• Get plans and specifications detailed enough for an appraiser and an underwriter to work from.
• Get a line-item budget, not a per-square-foot estimate.
• Check the contract type. VA construction financing requires a fixed-price contract complete through certificate of occupancy; cost-plus is not eligible.
• Interrogate the allowances. Placeholders set too low make a budget look affordable and then produce change orders.
• Confirm site work is inside the contract — driveway, well, septic, final grading. A contract that omits them is not a complete contract.
• Agree the timeline, and check it fits inside the program’s completion window. On conventional financing that ceiling is 18 months and is not extendable.
• Understand the deposit you are being asked for and what happens to it if the loan does not proceed.
• Understand the change-order process before you need it, including who approves what and how long it takes.
• Agree the contingency approach with your lender and builder.
• Confirm permits and who is responsible for pulling them.
• Sanity-check appraisal feasibility against the finished value the budget requires.
• Confirm loan-program compatibility for what you are actually building — property type, occupancy and unit count.

The goal of both checklists is the same: prevent yourself committing to a project structure that cannot be financed. Every item is answerable before money changes hands, and every one of them is cheaper to answer now than to discover in underwriting.

Why construction loans get delayed

Construction files run into the same handful of problems repeatedly. Nearly every one is avoidable with preparation.

• The program was chosen before the project was defined. The most common and most expensive mistake, and the reason everything on this page is ordered the way it is.
• Builder documentation. Licensing, insurance, financials and references are routinely the slowest item on the file — and on USDA the builder standards are set in federal regulation, so there is no flexibility to work around them.
• Incomplete plans and specifications. The appraiser cannot value what is not documented, and the underwriter cannot approve what is not specified.
• An unrealistic budget. A per-square-foot estimate is not a budget, and a number that will not complete the work produces change orders.
• Appraisal shortfall. The as-completed value comes in below what the structure requires, and the gap becomes cash or cut scope.
• Land and title problems. An unreleased lien, a boundary question, or an easement nobody checked.
• Zoning and permitting. Local review times vary widely across Maryland, and a jurisdiction with a long queue consumes a large part of your completion window.
• Well and septic. A failed percolation test can end a project outright, and permits gate everything else.
• Site work costs discovered after the budget was set.
• Change orders that need lender approval and appraisal reconsideration.
• Cost overruns beyond what the contingency absorbs.
• The construction timeline slipping toward a program deadline — and on conventional financing, the 18-month ceiling admits no exceptions.
• Borrower changes during construction. A new job, new credit or a large unexplained deposit can complicate the re-verification before conversion.
• Project and property incompatibility. A detached site condominium on USDA, a single-wide on conventional, a second home on a government program.
• Loan-limit issues. Land plus construction exceeding the county FHA limit or the conforming limit.
• Incomplete draw documentation holding up a payment the builder is waiting on.
• Assuming your lender offers it. Many do not, and USDA requires the lender itself to have construction lending experience.

Frequently asked questions

Sources

This page compares the construction financing options generally available to Maryland homebuyers. It does not determine individual eligibility, is not a commitment to lend, and is not a Loan Estimate. No interest rate is offered or implied and no closing or construction timeline is promised. Appraised values, including as-completed values, are opinions reached by a licensed appraiser and are not guaranteed. It is general information rather than legal, zoning or tax advice; land use, buildability, permitting, well and septic and contractor licensing questions should be confirmed with the appropriate Maryland agency or jurisdiction and, where the stakes justify it, with a surveyor or attorney. Program terms are set by the U.S. Department of Housing and Urban Development, the U.S. Department of Veterans Affairs, the United States Department of Agriculture and Fannie Mae respectively and are subject to change, and participating lenders may apply additional requirements that differ from lender to lender. Availability of construction financing varies by lender. Maryland Homebuyer Hub is not affiliated with, endorsed by, or acting on behalf of any of those agencies or enterprises, the Maryland Department of Housing and Community Development, the Maryland Department of Labor, or any government agency.