Quick Answer
Yes, you can use a one-time close construction loan to build on land you already own. Most lenders will allow the appraised value or equity of your land to count toward your down payment or borrower contribution, depending on the loan program.
This applies to FHA, VA, and USDA one-time close loans, which require specific documentation and title requirements.
What is a one-time close construction loan?
A one-time close construction loan—also known as a construction-to-permanent loan—combines the cost of building a home and the long-term mortgage into a single loan with a single closing.
This eliminates the need for separate construction and mortgage loans, which typically require two applications and two closings.
For borrowers who already own land, the one-time close format provides an efficient way to build a home without the need to purchase a lot.
In many cases, the land can be used as part of your equity contribution.
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Can you build on land you already own?
Yes. All major one-time close loan types, including FHA, VA, and USDA, allow borrowers to use pre-owned land for the construction project. Whether the land was:
- Purchased in cash
- Financed and paid off
- Gifted or inherited
- Recently acquired with a loan
You may use its value as part of your borrower contribution or down payment, depending on how the loan program calculates equity.
How land equity affects your loan
If you own the land outright, most lenders will allow the current appraised value of the land to count toward your down payment or loan-to-value (LTV) ratio.
For example:
- You own land worth $50,000
- Your total construction project costs $350,000
- The appraised value of the completed home is $400,000
You could potentially finance 100% of the construction using a one-time close loan, depending on the program, because your land equity covers the down payment requirement.
If you have a remaining loan on the land, the unpaid balance is typically included in the overall mortgage, and your equity is the difference between the appraised value and what you owe.
FHA, VA, and USDA guidelines for using owned land
Each government-backed program has its own rules for building on land you already own:
| Program | Use of Owned Land | Land Equity Toward Down Payment | Title Requirements |
| FHA | Allowed | Yes (counts toward 3.5% down) | Must be titled in the borrower’s name at or before closing |
| VA | Allowed | Yes (can help meet 100% LTV) | Borrower must hold a clear title or transfer prior to closing |
| USDA | Allowed if in eligible area | Yes (equity reduces loan amount) | Title must be vested before closing; location must meet USDA criteria |
Most lenders require the land to be titled in the borrower’s name prior to closing. Some may allow the title transfer to occur at closing, particularly in cases where the land is gifted or inherited.
What documents are required?
To use a one-time close loan for construction on your land, you’ll need to provide:
- Recorded deed showing your ownership
- Property tax records
- Survey and zoning verification
- Title insurance or abstract
- Appraisal report (ordered by the lender)
- Site prep or lot development cost estimates (if needed)
If the land was recently gifted, you may also need to show:
- Gift letter from the donor
- Documentation of the title transfer
- Compliance with the seasoning period (in some cases)
Can you include land prep costs in the loan?
Yes. One-time close construction loans typically allow you to finance the costs of preparing the land for construction, including:
- Grading and excavation
- Utility hookups (water, sewer, electric)
- Access roads or driveways
- Foundation or soil testing
- Permit and inspection fees
These expenses are included in the builder’s contract and must be part of the total appraised value of the completed home.
Benefits of building on land you already own
Using a one-time close loan to build on land you own offers several advantages:
- Lower out-of-pocket costs due to land equity
- Avoids the need for a separate lot loan
- Simplifies financing with one closing and one mortgage
- Can shorten timelines if the land is already approved for residential use
- May increase your borrowing power if the land has appreciated in value
If your land is paid off and appraises well, you could qualify for construction with little or no additional down payment.
What if you’re buying the land and building at the same time?
If you don’t already own land but plan to purchase it as part of your construction project, a one-time close loan can still cover both the land acquisition and the build. In this case, the purchase price of the land is included in the total loan amount and is subject to the same appraisal and underwriting guidelines as the construction phase.
The process differs slightly from using already owned land. You’ll need:
- A sales contract for the lot
- A combined construction and land purchase contract
- Seller cooperation on timing and title transfer
Your lender will order a single appraisal based on the projected value of the finished home, including the land. The combined loan closes before construction begins, and the builder receives draw payments from an escrow account.
This option is ideal if you’ve identified a lot but want to simplify financing. You avoid multiple closings and may qualify for low- or no-down-payment options, depending on the loan program.
FAQ: One-time close loan to build on own land
Q: Can I use land I inherited with a one-time close construction loan?
A: Yes. Inherited land can count as equity toward your loan, but you must ensure the title is transferred into your name before or at closing.
Q: Will the value of my land reduce the amount I need to borrow?
A: Yes. If you own the land, its value is included in the loan-to-value calculation, which can reduce your required down payment or the amount of the loan.
Q: Can I build on land with an existing loan?
A: Yes, but the balance of the land loan must be included in the new mortgage, and you’ll need sufficient equity for approval.
Q: Does the land need to be in a specific location?
A: For USDA loans, yes. However, the land must be in a USDA-eligible rural area. FHA and VA loans have no geographic restrictions.
Build your home on land you already own—with one loan
A one-time close construction loan offers a convenient and cost-effective way to build a home on land you already own. Whether you bought the lot years ago, inherited it, or recently acquired it, using land equity can significantly reduce your cash-to-close and streamline your financing process.
To explore how your land can help you qualify for a construction loan, connect with the experts at GO Mortgage. Start your application today.