From 0% for eligible veterans to 10% or more on conventional, and your land may count.
The down payment on a construction loan depends on the program, the property, and whether you already own the lot. Ken Clark Jr., Certified Mortgage Advisor with PRMG, breaks down typical minimums by program and explains how land equity and gift funds can reduce what you bring to closing.
Short answer: it ranges from nothing for eligible veterans and eligible USDA buyers to about 10 percent on conventional, and more on jumbo and investor loans.
| Program | Typical minimum down payment | Notes |
|---|---|---|
| VA one-time close | 0% for eligible veterans with full entitlement | VA funding fee unless exempt; primary residence |
| USDA one-time close | 0% for eligible buyers in USDA-eligible rural areas | Income and location limits; payment reserve at closing |
| FHA one-time close | 3.5% for eligible borrowers | FHA county loan limits; credit commonly starts around 620 |
| Conventional one-time close | Commonly about 10% (up to about 90% financing) | Primary or second home; credit commonly around 680+ |
| Jumbo construction | Larger down payment typically required | Loan amounts above conforming and high-balance limits; reserves typically required |
| Investor ground-up (business purpose) | Commonly 15% or more of cost (up to about 85% of cost) | Capped around 70 to 75% of completed value; not for owner-occupied homes |
Typical ranges for eligible borrowers, subject to underwriting, credit, appraisal, and program guidelines.
Short answer: possibly, but only in specific situations. Eligible veterans with full entitlement may use a VA one-time close loan with no down payment, and eligible USDA buyers may finance up to 100 percent in eligible rural areas.
Even with no down payment, expect closing costs, the VA funding fee (unless exempt) or USDA guarantee fee, and property taxes during construction. Check a USDA address on the USDA eligibility map before choosing a lot. See VA construction and USDA construction.
Short answer: often yes. If you already own the lot, its equity may cover some or all of the required down payment and sometimes closing costs, depending on the program.
On conventional single-closing loans that follow Fannie Mae rules, an owned lot means the loan is measured against the as-completed value, so land equity works like a down payment. On government programs, if the land was a gift or you have owned it for a required period (commonly 6 months on FHA and 12 months on VA), its current value rather than your purchase price may be used. Any existing lot loan is paid off at closing. Full details: using land equity.
Short answer: the loan is generally measured against the lower of total cost (lot plus construction) or the as-completed value, and your down payment is based on that figure.
That means a lower appraisal or a lot bought above market can increase your cash to close. See buying land and building.
Short answer: gift funds from an acceptable donor, commonly a family member, are generally allowed on many owner-occupied programs, with documentation, subject to program guidelines.
Expect a signed gift letter and a paper trail showing the transfer. Gifts of land may also help, since gifted land value may be used on some government programs. Gift rules for second homes, jumbo, and investor loans are typically tighter.
See cost overruns for why reserves matter.
Educational illustration only. Not an actual client, loan offer, or commitment to lend.
A buyer in Sacramento County owns a lot free and clear worth $180,000. The builder's fixed-price contract is $540,000, and the as-completed appraisal is $760,000. On a conventional one-time close program at 90 percent of the as-completed value, the maximum loan would be $684,000. That covers the $540,000 build plus closing costs, with the land equity standing in for the down payment. They still keep cash reserves for upgrades.
Where available: PRMG construction programs are available in every state where PRMG is licensed, which is all states except New York, including California and New Jersey, subject to eligibility and program guidelines. In California, building permits are typically required before a one-time close loan closes.
Answered by Ken Clark Jr., Certified Mortgage Advisor. Program availability and requirements vary and are subject to change.
It depends on the program: 0 percent for eligible veterans with full entitlement or eligible USDA buyers, 3.5 percent for eligible FHA borrowers, commonly about 10 percent on conventional, and more on jumbo and investor loans.
Possibly, if you are an eligible veteran with full entitlement using VA, or an eligible buyer in a USDA-eligible rural area using USDA, subject to program guidelines.
Often yes. Equity in a lot you own may cover some or all of the required down payment, depending on the program.
As little as 3.5 percent for eligible borrowers, subject to FHA county loan limits.
Conventional one-time close commonly allows up to about 90 percent financing, so about 10 percent down or equivalent land equity for qualified borrowers.
Gift funds from an acceptable donor are generally allowed on many owner-occupied programs with documentation, subject to program guidelines.
Jumbo construction typically requires a larger down payment and reserves than conforming programs. Exact requirements depend on the program and borrower.
Investor ground-up loans commonly finance up to about 85 percent of cost, capped around 70 to 75 percent of completed value, so expect 15 percent or more.
Usually yes, although land equity or seller or builder credits may help depending on the program.
It depends on the specific assistance program and its rules. Ask us to check your situation.
Guidelines change. Verify current program requirements with Ken Clark Jr. before relying on them for a transaction.
Disclaimer: This content is for educational purposes only and is not a commitment to lend, a guarantee of approval, or a rate quote. Loan programs, down payment requirements, terms, and eligibility depend on borrower, property, project, builder, and program qualifications, are subject to underwriting, and vary by state. Not all applicants or projects will qualify. Builder registration is a documentation review for program eligibility and is not an endorsement of any builder. Equal Housing Opportunity. Paramount Residential Mortgage Group, Inc. (PRMG), NMLS #75243. Ken Clark Jr., NMLS #225375. PRMG is licensed in 49 states, excluding New York.
Certified Mortgage Advisor and Branch Manager at PRMG Mortgage (NMLS #75243). 28 years in mortgage lending. Specializes in FHA, VA, conventional, DPA, jumbo, Non-QM, renovation, and construction financing for buyers and investors in Sacramento, New Jersey, and nationwide. PRMG is licensed in 49 states, excluding New York. Three-time Gold Award winner for Highly Reviewed Mortgage Team in Sacramento (2023, 2024, 2025). NMLS #225375.
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