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Construction Loan Closing Costs: What to Expect
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Construction loan closing costs include the usual mortgage fees, such as appraisal, title, government recording charges and prepaid items. They also include project costs a regular purchase doesn't have, like draw inspections, title updates during the build and builder review. Your Loan Estimate lists them, and your Closing Disclosure confirms them before you sign.
Last updated: November 2, 2026
Because every lender, program and county is different, this guide explains the categories rather than quoting amounts. Use it to read your own Loan Estimate with confidence.
What are closing costs on a construction loan?
The CFPB defines them simply: "Closing costs, or "settlement costs," are the upfront costs you will be charged to get your loan and transfer ownership of the property" (CFPB Closing Disclosure explainer).
On a custom-home build, "the property" may be just the land at closing. The loan then funds the house in stages. That's why construction loans add costs tied to the project and the draw process. See how construction loan draws work.
What closing costs are the same as a regular mortgage?
The CFPB lists common closing fees, including "Appraisal fees," "Title insurance," "Government taxes" and "Prepaid expenses such as property taxes, homeowners insurance, and interest until your first payment is due" (CFPB, closing fees).
On your Loan Estimate, these usually fall into a few groups:
- Origination charges: What the lender charges to make the loan, including any points you choose to pay.
- Services you can't shop for: Items like the appraisal and credit report, which the lender picks.
- Services you can shop for: Often title and settlement services.
- Taxes and government fees: Recording fees and any transfer taxes.
- Prepaids and escrow: Homeowners insurance, property taxes and prepaid interest.
What extra costs come with a construction loan?
| Cost category | What it covers | Who usually arranges it |
|---|---|---|
| As-completed appraisal | Values the home from your plans and specs | Lender |
| Builder review | Checks your builder's license, insurance and history | Lender |
| Plan or cost review | Reviews the contract, budget and plans | Lender or a third party |
| Draw inspections | Confirms work is done before each draw | Lender or inspector |
| Title updates | Checks for liens before each draw | Title company |
| Builder's risk insurance | Covers the structure during the build | You or your builder |
| Permits and surveys | Local permits, plat or survey updates | Builder or you |
| Final inspection | Confirms the home is complete | Lender or inspector |
Some of these are paid at closing. Others are charged during the build or deducted from each draw. Ask your lender which apply and when they're due.
On VA construction loans, the VA's guidance puts some costs on the builder. It says that "during construction, the builder is responsible for interest payments and all fees normally paid by builders with interim construction loans, such as inspection fee, title updates, title update fees, hazard insurance, and property taxes" (VA Home Loan Buyer's Guide).
How do one-time and two-time closes change your closing costs?
With a one-time close, you close once for both the construction phase and the permanent mortgage. You generally pay one set of closing costs.
With a two-time close, you take out a short-term construction loan, then close a separate mortgage when the home is finished. Many fees, like the appraisal, title and recording, may repeat at the second closing. See one-time vs. two-time close.
Each structure has tradeoffs beyond closing costs, so compare the total picture, not just the fees.
Can you finance closing costs or use land equity?
Sometimes. Some programs let certain costs be built into the loan amount. If you already own your land, its equity may count toward your cash to close. See land equity and construction loans and construction loan down payment.
Financing costs isn't free. The CFPB says, "You're still paying for these costs—they are just paid through your loan instead of paid out of pocket." A lender credit works similarly: it's usually offset somewhere else in the loan.
How can you compare closing costs between lenders?
Use the Loan Estimate. The CFPB says, "All lenders are required to use the same standard Loan Estimate form" (CFPB, What is a Loan Estimate?). That makes side-by-side comparison much easier.
When you compare:
- Request Loan Estimates on the same day, for the same project.
- Line up origination charges, third-party fees and cash to close.
- Ask each lender for its draw, inspection and title update fees, which may not all appear on page one.
- Ask what happens to fees if the build runs long. See over budget or behind schedule.
The CFPB Loan Estimate explainer walks through each section of the form. Choosing a lender? See how to choose a construction lender.
When do you see your final closing costs?
Lenders must give you a Closing Disclosure before closing. The CFPB says, "Lenders are required to provide your Closing Disclosure three business days before your scheduled closing." Compare it line by line with your latest Loan Estimate, and ask about any changes.
Plan your cash for the full project schedule, too. As of the Census Bureau's 2025 annual data, published July 1, 2026, contractor-built homes took an average of 10.5 months from start to completion (Census start-to-completion table). Some fees will come due along the way. To weigh total costs against buying an existing home, try our build vs. buy calculator. For the whole process, start with how to finance a custom home.
Frequently asked questions
Are closing costs higher on a construction loan?
Often, because construction loans add project costs like draw inspections and title updates on top of the usual mortgage fees. Your Loan Estimate shows the details.
Can I roll closing costs into a construction loan?
Some programs allow certain costs to be financed. The CFPB notes you're still paying for them, just through the loan.
Do I pay closing costs twice with a two-time close?
Usually, yes. A two-time close has two separate loans and two closings, so many fees repeat.
Who pays for draw inspections?
It depends on the lender and program. Some charge you, some charge the builder, and some include the fees in the loan.
When will I see my final closing costs?
On your Closing Disclosure, which lenders must provide at least three business days before closing.
Sources
- CFPB Closing Disclosure explainer
- CFPB, What fees or charges are paid when closing on a mortgage?
- CFPB Loan Estimate explainer
- VA Home Loan Buyer's Guide
- U.S. Census Bureau, start-to-completion times
Ready to compare construction loan offers?
Tell us about your land, builder and budget, and we'll connect you with lenders who can give you a Loan Estimate for your custom home. Get connected at My Construction Path.
My Construction Path is not a lender and does not make loans or credit decisions. Not all borrowers will qualify. Equal Housing Opportunity. Requirements vary by lender, loan program, and location. This article is for general education and is not a commitment to lend. It is not a quote of rates, payments, or loan terms.