Home Loans Explained: Down Payments, Loan Types & the Construction-to-Perm Loan for Tampa Bay Buyers

One of the most common things we hear from buyers is that the financing side of buying — or building — a home feels overwhelming. FHA, conventional, VA, ARM, construction-to-perm… what does it all mean, and which one is right for you?

 

The good news is that once you understand the basics, the options start to make a lot of sense. This is something I walk buyers through all the time, and once you understand it, it becomes much less overwhelming.

 

This guide breaks down the most common loan types for Tampa Bay buyers and takes a deeper look at construction-to-permanent financing.

 

If you’ve been following along, this ties directly into what we’ve already covered about Why New Construction Is So Limited in Palm Harbor, Spot Lots, and Buying a Lot and Building Custom.

 

The Most Common Loan Types for Tampa Bay Buyers

 

• Conventional Loan  

The most widely used mortgage. Minimum down payment as low as 3–5% for primary residences.

 

If you put less than 20% down, you’ll typically pay private mortgage insurance (PMI) — a monthly cost that protects the lender, not you. The good news is PMI can usually be removed once you build enough equity.

 

Typically requires a 620+ credit score.

 

• FHA Loan  

Designed for buyers with lower credit scores or smaller down payments. Requires 3.5% down with a 580+ score.

 

FHA loans also require mortgage insurance, but it works differently than PMI. There’s both an upfront fee and a monthly cost, and in most cases, it stays for the life of the loan unless you refinance.

 

• VA Loan  

Available to eligible veterans and active-duty service members. Offers 100% financing with no PMI. A funding fee applies.

 

• Adjustable-Rate Mortgage (ARM)  

Offers a fixed rate for an initial period (5, 7, or 10 years), then adjusts. Caps limit how much the rate can increase at each adjustment and over the life of the loan.

 

• The Construction-to-Permanent Loan: What It Is and How It Works

 

If you’re buying a lot and building a custom home — or purchasing a spot lot home that’s not yet complete — you’ll need a different type of financing.

 

In areas like Tarpon Springs, Palm Harbor, Dunedin, and Safety Harbor — where many opportunities involve spot lots or teardown properties — this type of loan becomes especially important.

 

A construction-to-perm loan is a single loan that covers both the construction phase and the permanent mortgage. You close once, pay one set of closing costs, and the loan converts when construction is complete.

 

How the Draw Process Works

 

Funds are released in stages based on construction progress. You only pay interest on the amount drawn, not the full loan.

 

Down Payment Requirements

 

Most lenders require 10–20% down. If you already own your lot, that equity can often count toward your down payment.

 

FHA and VA one-time close options may allow lower down payments for qualified buyers.

 

Credit Score Requirements

 

Typically 680–720+ for conventional construction loans. FHA and VA options may allow lower scores.

 

The “Subject-To” Appraisal

 

The home is appraised based on plans and specs before it is built. The appraised value must support the loan amount.

 

One Closing vs Two Closings

 

One-time close loans simplify the process and reduce costs. Two-closing options exist but require refinancing later.

 

Key Tips for Tampa Bay Buyers

 

• Get pre-qualified before shopping for a lot  
• Work with lenders experienced in construction loans  
• Budget a contingency reserve  
• Choose your builder early  
• Finalize decisions before construction begins  

 

Ready to Explore Your Options?

 

Whether you’re buying, building, or just starting to explore, understanding your financing options is key.

 

I work closely with local lenders and can help connect you with the right professionals for your situation.

 

Contact Information:

Rhonda Worley  

Red Sash Realty  

813.300.1046  

Rhonda@RhondaWorley.com  

RhondaWorley.com

 

Note: Loan programs, rates, and requirements vary. Always consult a licensed mortgage professional.