Mortgage Myth #7: You Can’t Lock Your Rate on a New Construction Loan Until the Home Is Finished

A surprising number of buyers, builders, and even lenders still believe you can’t lock in a mortgage rate until construction is complete. That myth creates unnecessary stress and budgeting uncertainty.

Let’s bust it right now:

If you’re using a One-Time Close (OTC) construction loan — you can lock your rate before the foundation is even poured. And if the market improves later? You can still float it down.

This is how we protect borrowers from rate volatility — especially in an uncertain market.

What Is a Rate Lock for New Construction?

A rate lock secures your mortgage interest rate for a fixed period — usually 30 to 360 days. In some new construction scenarios, build time exceeds that window.

But with an OTC loan, we lock the rate up front — at the time of application — and carry that locked rate through the entire construction process.

How the Float-Down Works:

If rates improve during the build, we don’t just lock you into a worse deal. When the home is finished and ready for conversion to permanent financing, we’ll proactively evaluate whether you qualify for a float-down — and apply it without you needing to ask.

There’s no re-approval with underwriting.

No new closing paperwork.

Just a better rate at the finish line.

Which Programs Support This?

• VA One-Time Close (0% down)
• USDA One-Time Close (0% down in rural areas; coming soon to Luminate Bank)
• FHA One-Time Close (3.5% down)
• Conventional One-Time Close (5%+ down)

Why This Matters:

Waiting to lock your rate until the build is done means you’re vulnerable to rising interest costs — potentially hundreds of dollars per month.

With this structure, you get:

• Payment stability upfront
• Downside protection later
• Confidence throughout construction

Ideal For:

• Buyers starting construction in a rising or volatile rate environment
• Military families using VA benefits
• Rural or first-time buyers concerned about affordability
• Realtors and builders who want less friction during the build

Take Action:

Thinking about building but unsure how to protect your budget?

→ Contact me with your scenario or questions.
→ Download our free New Construction Guide here.

Looking to learn more about other mortgage myths? Check them out here.