Delaware Construction Loans: How a One-Time Close Works, Down Payment & Builder Rules in 2026

Maybe you’ve lost three bidding wars, or every house you tour needs $60,000 of work before it fits your family. Building starts to look like the only way to get the home you actually want, and then the financing looks complicated: a loan for the lot, a loan for the build, a mortgage at the end. I’m John Thomas, NMLS #38783, and my goal on this page is to show you how a one-time close construction loan rolls all of that into one loan in Delaware, with the rate set before the build starts, what your builder has to do, and what it really costs while the house goes up. If you haven’t picked a lot yet, our page on Delaware land loans covers buying land on its own, and each program has its own guide linked in the comparison table below.

What Is a One-Time Close Construction Loan?

A one-time close construction loan, also called a single-close construction-to-permanent loan, is one mortgage that pays for the lot and the build, then becomes your long-term mortgage when the home is finished. The borrower qualifies and closes once, before construction starts, as long as the build finishes within the loan’s construction term.

The older way to build was a two-time close: a short-term construction loan from one lender, then a separate mortgage once the house was done, with a second application, a second set of closing costs and a second underwriting decision at the end. A one-time close removes that second closing. The permanent loan terms are set in your closing documents, and when the builder finishes, the loan converts or is modified into the permanent mortgage. Fannie Mae describes this structure in its Selling Guide section on single-closing construction-to-permanent loans.

One loan doesn’t mean nothing happens at the end. Before it converts, the home needs a certificate of occupancy and a completion inspection by the appraiser, and if your documents have aged out or the value came in lower, the lender rechecks your file. I cover that in the steps below so it isn’t a surprise.

How Does a Construction Loan Work in Delaware, Step by Step?

A Delaware one-time close construction loan runs in seven steps: get pre-approved, pick a builder the lender accepts, sign a fixed-price building contract, appraise the plans, close once, build with inspected draws, then convert to the permanent mortgage. Builder acceptance has to happen before the loan application moves forward, so it comes early.

1. Get pre-approved. We review your credit, income, savings and the rough budget for the lot and the house, and tell you which program fits.
2. Choose a builder the lender accepts. Your builder sends a package (license, insurance, experience, references and financials) for review. You can’t act as your own general contractor.
3. Sign a fixed-price contract. The contract has a set price, not cost-plus, with no clause that lets the price rise if materials go up. It also says who pays the interest during the build.
4. Appraise the plans. The appraiser values the finished home “subject to completion,” using your contract, plans and specifications, and the land contract or deed.
5. Close once. The loan pays off or buys the lot, and the construction and permanent terms are set in one set of documents. Your rate is fixed for the build, with a float-down option before conversion if rates drop.
6. Build with inspected draws. The builder is paid in stages as an inspector confirms the work, usually five progress draws plus a final draw.
7. Convert to your permanent mortgage. After the certificate of occupancy and the appraiser’s completion inspection, the loan becomes your regular principal-and-interest mortgage.

In my experience, the construction files that stall early usually aren’t about the buyer’s credit. They stall on paperwork from the builder side: a builder package that’s missing an insurance certificate, or a contract written as cost-plus or with a price-escalation clause that has to be rewritten before anything moves. That’s why I ask for the builder’s name and a draft contract at the pre-approval stage, not after you’ve fallen in love with a floor plan.

Which Construction Loan Programs Can You Use in Delaware?

As of October 2026, Delaware buyers can build with a conventional, FHA, VA or USDA one-time close loan, and larger builds can use a jumbo construction loan. Conventional needs about 5% down, FHA 3.5%, and VA and USDA can allow 0% down when the borrower meets that program’s rules.

Program	Minimum down payment	Credit score	Occupancy	Who it fits
Conventional one-time close	5% (95% loan-to-value)	640	Primary residence or second home	Solid credit, some savings, wants PMI that can come off later
FHA one-time close	3.5% (96.5% loan-to-value)	640	Primary residence	Smaller down payment, more flexible debt ratios
VA one-time close	0% with full entitlement	640; 680 above the conforming limit	Primary residence	Eligible veterans and service members
USDA one-time close	0%	See the USDA page	Primary residence	Moderate income, building in a USDA-eligible area
Jumbo one-time close	See the jumbo page	See the jumbo page	See the jumbo page	Builds above the conforming loan limit

HUD sets the 3.5% FHA minimum on its FHA loans page, VA explains how entitlement and the funding fee work on its funding fee and closing costs page, and USDA describes its zero-down program on the Single Family Housing Guaranteed Loan page, and you can check whether a lot is in an eligible area with USDA’s property eligibility lookup. The 2026 conforming loan limit that separates a standard loan from a jumbo is $832,750 for a one-unit home, set by FHFA. Each program page linked in the table goes into that program’s own rules in detail.

How Much Down Payment Do You Need to Build a Home in Delaware?

As of October 2026, most Delaware buyers need 5% down to build with a conventional one-time close loan, 3.5% with FHA, and 0% with VA or USDA when eligible. The down payment is figured on the lot price plus the building contract, and equity in a lot you already own can count toward it.

Your total cost to build is the building contract plus the price of the land, if you’re buying it. The loan-to-value is measured against the lower of that total cost or the “as completed” appraised value. So if the appraiser values the finished home below your contract, the down payment is figured on the lower number and you’d cover the difference.

Gift funds from an eligible family member can cover the down payment on a primary residence under each program’s rules. The one restriction buyers don’t expect: the donor can’t be the builder, the real estate agent or anyone else with a stake in the sale. Cash kept at home and “sweat equity” from doing work yourself don’t count as down payment funds.

Do You Make Payments While Your Home Is Being Built?

Not always. Construction interest is charged only on the money already paid out to the builder and is billed monthly, unless it is financed. FHA one-time close buyers can finance it into the build cost and make no payments during construction, and under current VA one-time close guidelines the builder pays it.

On an FHA one-time close loan you choose between two ways to handle it: pay the interest monthly on what has been drawn, or finance it into the build cost so there are no payments while the house goes up. Financing it makes it part of the total cost the loan and down payment are figured on, so we run the numbers both ways before you sign. On a conventional loan, the building contract says whether you or the builder pays the monthly interest.

When interest is paid monthly, the payment starts small and grows as the house goes up, because it is charged only on what has been drawn. Early in the build, when the loan has paid for the lot and the foundation, you’re paying interest on that amount, not on the full loan. Near the end, most of the loan has been drawn and the interest payment is close to what interest on the whole loan would be. Principal payments start after the loan converts.

Two details matter here. First, a monthly interest bill has to be paid each month: the lender can hold the next draw until it is, which can slow your builder down. Second, your interest rate is set at closing and stays the same through the build. If rates drop while the house goes up, a float-down option can let you move to the lower rate during the 30 days before the loan is modified into your permanent mortgage, under the program’s terms at that time. If the build runs long, the rate lock may need an extension, and on these loans the builder pays for lock extensions, with a cap on how many the lender allows. Some builders offer to pay the construction interest as part of the contract price, so it’s worth asking before you sign.

Property taxes and homeowners insurance aren’t paid out of escrow during construction; you keep them current yourself until the loan converts. If your permanent loan will have an escrow account, it’s set up at closing with an initial deposit.

What Does Your Builder Need to Qualify for a Construction Loan?

A builder needs to be accepted by the lender before the loan application moves forward. The review covers the builder’s license where the state requires one, general liability and workers’ compensation insurance, construction experience, financials, recent completed homes and references. Acceptance lasts one year, and the borrower can never be the general contractor.

Builder acceptance protects you as much as the lender. It’s a check that the company is licensed, insured, financially stable and has finished homes like yours recently. Here is what a builder is usually asked to send:

• A signed builder application and a W-9
• A current contractor or dealer license where one is required
• Certificates of general liability insurance and workers’ compensation (or a signed exemption if every trade is subcontracted)
• A written overview of construction experience and a list of homes finished in the last 12 months
• Recent tax returns and a profit and loss statement
• Customer, subcontractor, supplier and bank references
• For a VA loan, the builder’s VA builder ID

Once accepted, a builder stays accepted for a year and can renew with updated license and insurance documents. If you’ve already chosen a builder, send me their name early: if they’re already accepted, that step is done, and if they’re not, we start the package while you finish your plans. Changing builders after closing needs the lender’s written consent and the new builder has to be accepted first, so it’s worth getting this right at the start.

How Do Construction Draws and Inspections Work?

A one-time close construction loan pays the builder in stages called draws: usually five progress draws plus a final draw, each released after an inspector confirms the work. Up to 10% can be released at closing when permits are in hand, and the final draw is at least 10% of the construction cost.

Stage	What happens	What it needs
At closing	Lot paid off or purchased; up to 10% can go to the builder	Building permits if the builder takes the initial release
First draw	Paid after the foundation stage	Permits, a foundation survey where required, title update (a check that no new liens were filed), lien waiver (the builder’s signed statement that it was paid for the work), inspection
Progress draws	Paid as framing, systems and finishes are completed	Inspection of completed work, title update, lien waivers
Final draw (at least 10%)	Paid when the home is complete	Certificate of occupancy, final survey, completion inspection by the appraiser, one year of paid homeowners insurance
Conversion	Loan becomes the permanent mortgage	Final title endorsement, taxes current, last construction interest paid

The inspector isn’t checking quality the way your own home inspector would; they confirm the work being paid for is done. I still recommend hiring your own inspector at key stages, such as before drywall goes up. Change orders, like an upgraded kitchen or a moved wall, have to be approved by the lender before the work is done, and because these loans don’t include a contingency reserve, an upgrade that raises the price is usually paid in cash rather than added to the loan.

Can You Use a Construction Loan to Build on Land You Already Own?

Yes. When you already own the lot, a one-time close construction loan pays off any loan on the land and finances the build, and your equity in the lot can count toward the down payment. Equity is based on the appraised land value, and the loan can’t give you cash back at closing.

On a conventional loan, building on land you own is set up as a limited cash-out refinance, and closing costs can be rolled into the loan amount when the value supports it. Any existing loan on the lot has to be paid off at closing, either from the new loan or with your own funds. FHA and VA have their own land rules, including how long you’ve owned the lot and how its value is counted. On a VA loan, land equity can also lower the VA funding fee.

If you want to buy land now and build in a few years, that’s a different loan. A one-time close construction loan expects construction to start soon after closing. For land you’ll hold for a while, see Delaware land loans, and when you’re ready to build, the lot you own becomes your equity.

What Kinds of Homes Can You Build With a One-Time Close Loan?

As of October 2026, a one-time close construction loan finances a one-unit site-built home, including homes in planned communities, and on custom builds also a modular or new manufactured home on a permanent foundation. Tiny homes, post-frame builds, condos, two-to-four-unit properties and homes you build yourself are not eligible.

Usually eligible	Not eligible
One-unit site-built single-family home	Tiny homes
Home in a planned unit development (PUD)	Post-frame (pole barn style) construction, 3-D printed homes, shed or container conversions
Modular home (custom build on your lot)	Condominiums and 2-4 unit properties
New manufactured home on a permanent foundation (custom build)	Owner-builder or do-it-yourself projects
Site-built home with an accessory dwelling unit that meets program rules	Farms and other primarily agricultural properties; investment properties

Lenders split builds into two types. A custom build is a one-off home on its own lot, even if the builder has used the floor plan before. A tract build is a home in a builder’s subdivision built from a few repeated plans. Modular and manufactured homes are financed as custom builds. Barndominiums are reviewed case by case: it depends on how the home is built (post-frame construction is not eligible), the program, and whether the appraiser can find comparable sales nearby. For manufactured homes in general, see our Delaware manufactured home loans guide.

What Costs Should You Budget for When You Build in Delaware?

Beyond the down payment and closing costs, Delaware buyers who build should budget for the state’s 2% realty transfer tax on construction contracts over $10,000, interest during the build, per-draw inspection and title-update fees, a builder’s risk insurance policy, and property taxes until the loan converts. Tax rules as of October 2026.

The transfer tax is the one Delaware buyers are least likely to hear about from a national lender. Delaware’s realty transfer tax law treats a contract to build a house as a taxable document when it is signed, or work starts, before the land transfers to you or within one year after. The state rate on those contracts is 2% of the amount over $10,000, and the law puts that tax on the owner of the building, which is you. It’s in Title 30, Chapter 54 of the Delaware Code (sections 5401 and 5402). Counties and towns can have their own transfer tax rules, so the title company confirms the total for your property.

• Interest during the build: interest only on the amount drawn, paid monthly by you or the builder per your contract, or on FHA financed into the build cost.
• Draw fees: an inspection fee and a title-update fee for each draw, plus a final completion inspection. Extra draws beyond the standard schedule cost more.
• Insurance: a builder’s risk policy, which insures the house while it is being built, covering the construction period, paid at or before closing, plus a one-year homeowners policy for when the home is finished. In a flood zone, flood insurance is required.
• Program fees: FHA’s upfront mortgage insurance premium and the VA funding fee can be financed; conventional loans under 20% down carry private mortgage insurance.
• Builder credits: a builder can pay some of your closing costs if the contract says so, within each program’s limits. On VA loans, seller and builder concessions are capped at 4% of the home’s value.
• Upgrades and overruns: no contingency reserve is built into the loan, so keep cash aside for changes you choose after closing.

Is a One-Time Close Better Than a Two-Time Close Construction Loan?

For most buyers building a primary residence with a lender-accepted builder, a one-time close costs less and carries less risk: one closing, one set of closing costs, one appraisal and title search up front, and a rate set before construction starts. A two-time close can fit an owner-builder project or a very long timeline.

Feature	One-time close	Two-time close
Closings	One, before construction	Two: construction loan, then the mortgage
Closing costs	One set	Two sets
Appraisal and title	One appraisal and title search at the start, plus a completion inspection and title updates during the build	Separate appraisal and title work for each loan
Permanent rate	Set at closing, before the build, with a float-down option in the 30 days before conversion	Set at the second closing, at the rates of that day
Qualifying	Once, with a recheck at conversion only if documents age out, the value drops or terms change	Twice; a job change or new debt during the build can affect the second loan
Builder	Must be accepted by the lender	Set by the construction lender

The risk with two closings is the second one. If rates rise, your hours are cut or the appraisal comes in short while the house is going up, the mortgage you were counting on can change or fall through after the construction money is already spent. A one-time close locks the permanent financing at the start, which is why I steer most Delaware buyers who are building their main home toward it.

When a One-Time Close Construction Loan Is Not a Good Fit

A one-time close construction loan is generally not the right tool if:

• You plan to act as your own general contractor or do much of the work yourself. These loans require a builder the lender accepts.
• You’re buying land now but won’t build for a few years. A land loan fits that timing better.
• You want to buy an existing house and fix it up rather than build new. A renovation loan finances the purchase and the repairs together.
• The home will be a rental, a tiny home, a post-frame build, a condo or a two-to-four-unit property.
• You’re counting on a down payment assistance second mortgage. FHA and VA one-time close construction loans don’t allow secondary financing, so the down payment has to come from your own funds, land equity or an eligible gift. Our Delaware first-time home buyers guide covers assistance options for buying an existing home.
• Your builder works only on cost-plus contracts or with price-escalation clauses, or the build will clearly run past 12 months.

Delaware Construction Loans – FAQ

About the Author – John R. Thomas

Last Updated: October 2026 · John Thomas Team with AnnieMac Home Mortgage · Mortgage content reviewed by John R. Thomas, NMLS #38783.

John R. Thomas, NMLS #38783 | John Thomas Team with AnnieMac Home Mortgage | AnnieMac Home Mortgage NMLS #338923 | 248 E Chestnut Hill Rd, Newark, DE 19713 | 302-703-0727 | delawaremortgageloans.net
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