Financing Land & A Build In Mechanicsville

You can picture the perfect house on a quiet Mechanicsville lot, but the path to financing land and a custom build can feel complicated. You are juggling loan terms, permits, draw schedules, and line items you may not expect. The good news is there is a clear way to organize the process so you stay on budget and on schedule. In this guide, you will learn how construction-to-permanent loans work, what St. Mary’s County will expect, and how to set your budget and timeline for a smooth build. Let’s dive in.

Financing paths in Mechanicsville

Construction-to-permanent loans

A construction-to-permanent loan, sometimes called a single-close loan, covers your land purchase and your build in one closing. During construction you usually pay interest-only on funds that have been disbursed. After final inspection and a certificate of occupancy, the loan converts to a standard mortgage with principal and interest.

This approach keeps your paperwork simpler and gives you predictable permanent financing. Some lenders let you lock the permanent rate at closing, while others float the rate until conversion. Ask about rate lock options up front so you know what to expect.

Separate lot and build loans

Some buyers purchase the lot with cash or a separate lot loan, then take a short-term construction loan for the build and refinance into a permanent mortgage later. This can work if you already own land or want flexibility in choosing a permanent loan later. The tradeoff is more complexity and potentially two sets of closing costs and approvals.

Down payment and equity expectations

Construction lending usually calls for more borrower equity than a standard purchase mortgage. For conventional construction loans that include land and build, you should plan for 15 to 25 percent down. If you already own the lot free and clear, the lender can often count that lot equity toward the down payment. Exact requirements vary by lender and program.

Loan programs that may fit

• Conventional construction-to-perm loans are available through many community and regional lenders in and around St. Mary’s County.
• FHA One-Time Close and VA construction options exist through approved lenders and follow program-specific rules for builder approval and occupancy.
• USDA programs may be available in rural parts of Maryland. Eligibility depends on location and income.
• Standalone lot loans are an option if you only need to buy land, though they often carry higher rates, shorter terms, and larger down payments.

How single-close construction loans work

One closing, two phases

With a single-close loan, you close once. The lender funds construction in stages according to a draw schedule, and you pay interest-only on what has been disbursed. After final inspection and lien releases, the loan converts to your permanent mortgage.

When rates lock and why it matters

Some lenders lock the permanent interest rate when you close on the construction loan. Others set the permanent rate at conversion. Clarify this early so you can plan your budget and choose your lender with confidence.

Lender checklist you should prep

Lenders commonly require the following before funding draws:

• Signed builder contract with a fixed price or guaranteed maximum price and a clear schedule.
• Detailed budget, cost breakdown, and draw schedule tied to phases.
• Builder qualifications, including license and insurance. Some lenders require a builder approval process.
• Architectural and engineered plans and approved building permits before the first or second draw.
• An appraisal based on plans and specs for the finished home.
• Title commitment, survey, evidence of lot ownership, or a payoff for any existing lot loan.
• Proof of reserves and contingency funds.

Draws, inspections, and disbursements

Typical draw schedule

Draws usually follow major phases. The exact schedule varies by lender and builder, but it often looks like this:

1. Lot purchase or payoff if included in the loan
2. Foundation and footings
3. Framing and roof
4. Rough mechanicals and insulation
5. Exterior finishes and interior finishes
6. Final punch list and completion

Lenders often hold back 5 to 10 percent of each draw until final completion to protect against incomplete work or liens.

Inspections, lien waivers, and paperwork

An independent inspector checks progress at each draw request. The builder submits invoices and lien waivers for work completed. Some lenders will not release the next draw until prior lien waivers are on file. If there is unpermitted work or a deficiency, the lender may reduce or hold the draw until the issue is fixed.

Draw pitfalls to avoid

• Delays in scheduling inspections can hold up payments to your builder.
• Change orders that are not documented and approved by the lender can stall disbursements.
• Missing lien waivers or builder paperwork can block the next draw.
• Noncompliant work discovered at the end can prevent conversion to your permanent mortgage.

Lot due diligence in St. Mary’s County

Title, survey, and zoning checks

Order a title search early to identify easements, covenants, rights-of-way, or liens. Get a stamped boundary survey so you understand buildable area, setbacks, and any encroachments. Confirm zoning and permitted uses with the county, including setback requirements and rules for accessory structures.

Septic, wells, and perc testing

Many Mechanicsville lots rely on onsite septic systems. A successful perc or soil evaluation and septic approval is often required before you can build or occupy. If the lot does not perc, you may need to connect to public sewer if available, use an engineered system such as a mound, or consider another lot. For water, confirm whether the property is served by public water or a private well, and secure any needed permits.

Floodplain, Critical Area, and environmental reviews

Review FEMA flood maps to see if the lot sits in a flood zone. If it does, expect elevation certificates and possibly higher insurance costs. Portions of St. Mary’s County fall under Maryland’s Critical Area program and may have added limits on clearing and buffers. Lots with wetlands or tidal impacts will require coordination with environmental authorities for permitted impacts.

Access, utilities, and driveway permits

Confirm legal access, either public road frontage or a recorded easement. If the property uses a private road, verify who maintains it and whether it meets county standards. Contact utility providers for estimates to extend electric, gas, and communications, and factor tap-in or extension fees into your budget. You may also need a driveway entrance permit depending on the road classification.

County permits you will need

Plan for building permits through the St. Mary’s County Department of Land Use and Growth Management, along with grading, erosion and sediment control, and stormwater approvals. If the site is not on public systems, septic and well permits are part of the package. You will need a final inspection and certificate of occupancy before your lender converts the construction loan to a permanent mortgage.

Budgeting smart for a smooth build

Soft costs and site costs to expect

Your budget should cover more than the base construction price.

• Hard costs: foundation, framing, systems, materials, and labor.
• Soft costs: architectural and engineering, permits and impact fees, utility taps, inspections, appraisal, and loan closing costs.
• Site-specific costs: clearing, grading, rock removal, driveway or access improvements, septic installation or sewer connection, well drilling, stormwater measures, and erosion control.
• Financing costs: interest during construction, origination and inspection fees, taxes, and any rate lock or float fees.
• Insurance: builder’s risk and liability coverage.

How much contingency to set aside

For modest, well-defined builds, plan for a 5 to 10 percent contingency on hard costs. For custom homes, complex sites, or rural lots with unknowns like rock or high water tables, 10 to 20 percent is prudent. Contingencies protect you from surprise site work, code-related changes, material price increases, and owner-driven upgrades.

Managing change orders

Set a written change order process in your builder contract. Each change should include written pricing, a schedule impact, and how it will be funded. Lenders usually require documented change orders and proof of funds before releasing money for changes. Keep a separate, accessible contingency reserve so you can approve necessary changes without stalling draws.

Timeline to keep financing on track

Use this sequence to align your financing, permits, and construction schedule:

1. Define your budget and desired loan type, then interview lenders that offer construction-to-perm in St. Mary’s County.
2. Secure conditional preapproval and verify down payment or lot equity.
3. Select a reputable, licensed builder familiar with county permitting, then finalize plans, specs, and a fixed-price or GMP contract.
4. Complete lot due diligence: title, survey, zoning confirmation, perc test and septic plan, well feasibility, floodplain and environmental checks, and utility estimates.
5. Order the appraisal based on plans and specs, submit the full package to your lender, and prepare for closing.
6. Close on your single-close construction loan or your chosen structure, then pull required permits as early as allowed.
7. Start construction and request draws at milestones, providing inspections, invoices, and lien waivers.
8. Track change orders and contingency usage weekly to protect your budget.
9. Complete final inspection and obtain the certificate of occupancy, provide lien releases, and convert to your permanent mortgage.

Quick checklists

Questions to ask lenders

• Do you offer single-close construction-to-perm loans for new builds in St. Mary’s County, and which programs are available?
• Is the permanent rate locked at closing or set at conversion? What are all fees for construction and conversion?
• What down payment or equity is required, and can lot equity count?
• What documents do you require for closing and each draw, including permits and lien waivers?
• How many draws are allowed, what is the retainage percentage, and how long from request to disbursement?
• What builder qualifications do you require, and do you have an approved builder list?

Documents to prepare for lender and county

• Executed builder contract with a line-item budget and draw schedule
• Architectural and structural plans and specifications
• Current boundary survey and site plan
• Septic perc test or permit, plus well documentation if needed
• Evidence of lot ownership or payoff statements
• Builder licensing and insurance, and builder’s risk if required
• Title commitment and any existing deeds or covenants
• Copies of issued permits as they become available

Buyer due diligence steps for a Mechanicsville lot

• Order a title search and purchase title insurance
• Obtain a stamped boundary survey
• Confirm zoning and setbacks with county staff
• Complete perc or soil testing and secure septic approval if needed
• Confirm public water availability or private well feasibility
• Review FEMA flood maps and county floodplain data
• Check for Critical Area, wetlands, or other environmental overlays
• Get utility extension estimates and driveway permit requirements
• Ask about local impact or connection fees

Work with a local guide

Financing land and a build has moving parts, but you can control the process with the right plan. A local team that understands St. Mary’s County permitting, rural lot nuances, and construction lending can save you time and money. From vetting lots and builders to organizing lender documents and scheduling county touchpoints, you deserve a coach and advocate who keeps everything aligned.

If you are considering a custom build in Mechanicsville, we are ready to help you map the steps, compare loan paths, and connect with trusted local partners. Let’s Connect — Book an Appointment with The Beckman Group.

FAQs

Can I finance land and a build with one loan in Mechanicsville?

• Yes. Many lenders offer construction-to-permanent single-close loans that can include the lot purchase and the build, though availability and terms depend on the lender and your qualifications.

How much down payment is typical for construction loans in St. Mary’s County?

• Conventional construction loans often require 15 to 25 percent equity, which can include lot equity if you already own the land. Program minimums vary for FHA, VA, and USDA options.

What if my Mechanicsville lot fails a perc test?

• You may need to connect to public sewer if available, redesign the septic system with an engineered solution, or consider another lot. Septic feasibility is essential for moving forward.

Who manages permits and inspections for a new build?

• Builders typically pull permits and schedule inspections, but you should verify status and keep copies. Lenders require evidence of permits and inspection sign-offs for draws and conversion.

How big should my contingency be for a custom home?

• Plan for 5 to 10 percent of hard costs on simpler builds and 10 to 20 percent for custom or site-complex projects. This protects against surprises like soil issues or material price changes.