The Quick Read: Sometimes, but only inside the limits. There is no separate “roll-in” allowance. Closing costs can be financed only if the final loan amount still fits under the loan-to-value cap, which is set by the appraised value of the finished home and by how you will live in it. Builder or seller credits are a different path, with their own caps.
The Straight Answer
Often yes, with limits. On a new build, lenders look at the loan amount against the value of the finished home. If the loan, including financed costs, stays under the cap, the costs can ride along. If it does not, you pay the difference in cash.
Conventional payment estimate
The starting figures are an example price at the first-time buyer’s minimum down payment. Replace them with yours.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a conventional loan quote.
Estimate seeded at the low end of Fannie Mae’s published range (0.58%–1.86% a year); the insurer prices the actual premium on the score and the leverage. Applies only above 80% loan-to-value.
Illustrative starting assumptions: a $350,000 price, the first-time buyer’s minimum down payment, a thirty-year term at the current Freddie Mac benchmark, mortgage insurance at the low end of Fannie Mae’s published range, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a conventional loan quote; your rate is set by the lender at lock. The mortgage insurance figure is an editable estimate seeded from Fannie Mae’s published typical range, not a premium quote; the insurer prices the actual premium, and the cancellation month assumes scheduled payments with no extra principal and no change in value. Taxes, insurance and dues are editable estimates; closing costs are not included. Conforming loan limits apply by county. Licensed in sixteen states for consumer mortgages.
Loan-to-value (LTV) is the loan amount divided by the home’s value. A 95% LTV means a 5% down payment. Across the wholesale programs I place files with, a one-unit principal residence typically goes to 97% LTV when at least one borrower is a first-time buyer, and 95% otherwise. Both are subject to lender guidelines and full file review.
Notice what that means. If you are already putting 5% down on a 95% loan, you are at the ceiling. There is no room left to finance closing costs. Rolling costs in works best when you are putting down more than the minimum. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Why You Will Hear Both “Yes” and “No”
Search this question and you will find pages saying it cannot be done and pages saying it can. Both are partly right, because three different things get called “rolling in.”
| Method | How it works | Who pays | Main limit |
|---|---|---|---|
| Financing the costs | Costs are added to the loan balance | You, over time | LTV cap and appraised value |
| Seller or builder credit | Builder pays part of your costs | Builder, often through price | Contribution caps |
| Lender credit | Lender covers costs in exchange for a higher interest rate | You, over time | Rate trade-off |
A page that says “you can’t” usually means the second or third path is the only real option on that lender’s program. A page that says “yes” usually means the first. The Consumer Financial Protection Bureau puts the idea simply: in a “no closing cost” loan, the costs are still paid. Either a lender credit covers them through a higher interest rate, or they are rolled into a higher balance.
Nothing disappears. It moves.
How the Appraisal Sets the Ceiling
The appraisal is the gatekeeper on a new build. Because the house is not finished when you sign, the appraiser values it “as completed,” meaning the way it will look once construction ends.
For a single-closing purchase, the lender takes the lesser of two numbers: the purchase price (lot plus construction) or the as-completed appraised value. The loan is measured against that lesser figure. That is the rule on Fannie Mae’s construction-to-permanent summary, which is an older fact sheet worth checking against the current guide.
Here is why this matters for closing costs. Say the contract price and the appraised value match. You borrow up to the cap, and any financed costs count against that cap. Say the appraisal comes in below the contract price. The lender uses the lower number, the cap shrinks, and the room for financed costs shrinks with it.
Picture a buyer under contract at a price, with a 95% loan in mind. The appraisal comes in a few percent low. The loan ceiling drops, and the buyer now owes more cash at closing, not less. Financing the costs was never going to fix that. It is the most common surprise I see on new builds, and it is the reason to ask early about the appraisal gap.
One Closing or Two? It Changes the Rules
New construction financing comes in two shapes, and they treat closing costs differently.
One closing. The construction financing converts to permanent financing without a second closing. You pay one set of closing costs. Per the Fannie Mae Eligibility Matrix, single-closing loans are processed as a purchase or a limited cash-out refinance.
Two closings. You take a short-term construction loan first, then a new permanent mortgage when the home is done. That means two sets of costs. Fannie Mae requires a new note at the second closing. These loans are processed as limited cash-out or cash-out refinances.
The lot decides which category a single-closing loan falls into:
- You do not own the lot yet. The loan is a purchase. The proceeds buy the lot and fund construction.
- You already own the lot. The loan is a limited cash-out refinance. The proceeds pay off any lot lien and fund construction.
A limited cash-out refinance is one that pays off existing debt and costs without handing you meaningful cash. Fannie Mae’s rule for that loan type lists financing closing costs, points and prepaid items as an acceptable use of proceeds. That is the formal footing for rolling costs in when you already own the land.
Two limits apply. First, you generally cannot take real cash out on a single-closing loan. Second, a borrower cannot roll self-financed cost overruns into a limited cash-out refinance. Fannie Mae’s FAQ allows a second mortgage taken for overruns to be included only if its proceeds went solely to construction.
On a two-closing loan, the borrower must have held title to the lot for a minimum period before the permanent closing to get cash-out treatment, and the exact requirement varies by lender and file. Two-closing cash-out is not allowed on a manufactured home.
What Counts as a Closing Cost on a New Build?
Closing costs on a new construction loan fall into four buckets.
1. Lender and loan fees. Origination, underwriting and similar charges tied to the mortgage.
2. Third-party fees. Appraisal, title, recording and similar services.
3. Builder-specific items. Some builders charge their own fees. These vary by contract.
4. Prepaids and escrows. Homeowners insurance, property tax set-asides and interest collected up front. These are often the biggest cash surprise on a new build.
Fannie Mae’s closing costs calculator says closing costs usually run 2% to 5% of the mortgage value, paid on top of the down payment. That is a general range, not a quote for your loan.
Which of these can be financed depends on the program. Under the limited cash-out rule, costs, points and prepaids can be financed. On a straight purchase, the question is simply whether the total still fits under the LTV cap. Builders’ own fees can be creditable in the contract, but they vary, so read your contract line by line.
Builder and Seller Credits Are a Separate Path
Many buyers ask about rolling costs in when what they really want is for someone else to pay. That is a credit, not a roll-in.
Fannie Mae calls builder or seller money toward your costs an interested party contribution, or IPC. Under the Fannie Mae Selling Guide’s IPC rules, these contributions are capped, and the cap is measured against the lower of the sales price or the appraised value. It is not measured against your loan amount. The cap steps up as your down payment grows and is lower for second homes and investment properties. Confirm the exact tiers for your occupancy and leverage with your loan officer, because they depend on the file.
Three rules matter most:
- Excess becomes a sales concession. Anything over the cap, or over your actual closing costs, lowers the sales price used for LTV. That can shrink your loan.
- No down payment or reserves. Credits cannot be used for your down payment or your required reserves.
- Credits are not free. A builder who offers a credit often builds the cost into the price or ties it to using a preferred lender. Ask what you give up.
Builder standby commitment fees are a narrow exception. Fannie Mae treats them as outside the IPC limits because they are not attributable to your specific loan. Also, Fannie Mae raised its lender incentive limit to $2,500 in May 2025, and a lender incentive from an interested party is treated as a sales concession.
If you want the seller-credit angle on a different loan type, Lendmire’s piece Can a Seller Pay Closing Costs on a New-Construction DSCR Loan? covers how those credits get written, though its loan lane differs from this one.
A Side-by-Side Look
Consider a buyer purchasing a new build as a principal residence. Same house, same price, three ways to handle the costs. All three are described in percentages and plain words, not dollars.
| Choice | Cash at closing | Loan balance | Long-run cost |
|---|---|---|---|
| Pay costs in cash | Highest | Lowest | Least interest paid |
| Finance the costs | Lower | Higher, if LTV allows | More interest over time |
| Take a builder credit | Lower | Same as cash option | Cost often sits in price or terms |
Financing the costs lowers what you bring to the table. It also raises the balance, which means a higher payment and more total interest over the life of the loan.
There is a second effect. Financed costs push your LTV up. Above 80% LTV, a conventional loan needs mortgage insurance. Across the programs I work with, mortgage insurance is required above 80% LTV, can be requested for cancellation at 80% of the original value with good payment history, and must be terminated automatically at 78% under the Homeowners Protection Act. Published typical annual premiums run 0.58% to 1.86% of the balance. That is a range, not a quote.
So a buyer sitting at 79% LTV who finances costs and crosses 80% can trigger insurance that was not in the plan. Run that line before you decide. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.
When does financing win? When cash is the true constraint, you are staying in the home for years, and you have room under the cap. When does paying cash win? When you have the cash and will keep the loan a long time, since every financed dollar earns interest for the life of the loan.
When Rolling In Does Not Work
Be honest with yourself about the cases where it fails.
- You are already at the maximum LTV. No room under the cap means no room for financed costs.
- The appraisal comes in low. The lesser-of test shrinks the loan ceiling.
- The home type is ineligible. The Eligibility Matrix says co-op units and attached condo units are not eligible for construction-to-permanent financing.
- The value drops at completion. If the completion appraisal shows a decline, expect a fresh review and possibly a requalification. Confirm the current rule in the Selling Guide.
- You want cash back. Single-closing loans do not allow cash out.
Occupancy also moves the ceiling. A principal residence carries the highest leverage. Second homes and investment property carry lower limits, so a second-home buyer has less room to finance anything. If the new build is a second home, the lower leverage cap applies, and that is where the conversation ends for this article.
How the Loan Actually Gets Done
Here is the sequence on a single-closing loan.
1. Choose the structure. One closing or two. This sets how many times you pay costs.
2. Qualify on the permanent terms. The construction phase is a temporary loan. You are underwritten on the mortgage you will carry long term. The wholesale conventional programs start at a 620 decision score, and the automated finding governs most files, with a total debt ratio ceiling of 50%. Every figure is subject to lender guidelines and full file review.
3. Get the as-completed appraisal. This sets the value ceiling.
4. Sign the contract with credits spelled out. If the builder is contributing, the credit goes in the purchase agreement or an addendum, with the amount and what it covers.
5. Finish construction and confirm completion. An appraisal update or completion report confirms the home is done. Fannie Mae will not buy the loan until construction is finished and the loan has converted.
6. Review the paperwork. The Loan Estimate and Closing Disclosure show your closing costs and cash to close. If the amount due on the Closing Disclosure went up, one reason can be that costs were rolled into the loan.
On long builds, timing matters. Fannie Mae limits the construction period on single-closing loans, and a long delay can complicate rate protection. Ask your loan officer how a delay would be handled before you sign.
Questions to Ask Before You Commit
Bring this list to the lender and the builder:
- Does my loan structure allow financing closing costs, and how much room do I have under the cap?
- What happens if the appraisal comes in below the contract price?
- Which costs are creditable in the builder contract, and which are not?
- Is there a requirement to use the builder’s preferred lender, and what do I give up if I do not?
- Is the credit built into the price or terms?
- Will prepaids and escrows be financed, credited or paid in cash?
- Can I compare Loan Estimates from more than one lender?
That last one matters. The CFPB suggests comparing closing costs as well as rates. A lender with lower fees and a slightly different structure can beat a larger credit with strings attached.
Common Myths
“Rolling costs in makes them go away.” It does not. They sit in your balance or your rate.
“A builder credit is the same as rolling costs in.” It is not. Credits have caps, and the excess lowers the value used for LTV.
“I can take cash out on a construction loan.” Not on a single-closing loan.
“Any home type qualifies.” Attached condos and co-ops do not.
“The lot’s value does not matter.” It does. The lot is built into the purchase price or the as-completed value used for LTV.
If a loan on a house you plan to live in is on your mind, Lendmire’s conventional loan programs page lays out how the options compare. A buyer going above the conforming limit has a different path, and Lendmire’s piece Roll Closing Costs Into a Jumbo Loan vs Pay Cash or Take a Credit covers it.
Key Terms Defined
Loan-to-value (LTV): The loan amount divided by the home’s value, shown as a percentage.
As-completed appraisal: A value estimate of the home as it will be once construction is finished.
Limited cash-out refinance: A refinance that pays off existing debt and costs and gives back only incidental cash.
Interested party contribution (IPC): Money a builder, seller or other party with a stake in the sale puts toward your costs.
Prepaids: Costs paid in advance at closing, such as the first insurance premium and set-aside tax payments.
Sales concession: A contribution above the allowed cap that reduces the sales price used to calculate LTV.
Frequently Asked Questions
Can I roll prepaids and escrows into a new construction conventional loan?
Sometimes. On a limited cash-out refinance, the rules list prepaid items as an acceptable use of proceeds. On a purchase, the test is whether the total loan still fits under the LTV cap. Prepaids are often the largest cash surprise on a new build, so ask your lender how yours are handled.
What happens if the appraisal comes in below the contract price?
The lender uses the lesser of the price or the appraised value, so your loan ceiling drops. Less room under the cap means less room to finance costs, and you may owe more cash at closing. Ask your builder early how an appraisal shortfall is handled in the contract.
Do builder credits count toward my down payment?
No. Interested party contributions cannot be used for the down payment or reserves. They can go toward closing costs, up to the cap, and any excess is treated as a sales concession.
Is it smarter to finance the costs or take a builder credit?
It depends on the structure of the deal. Financing raises your balance and total interest. A credit lowers cash at closing, but its cost is often built into the price or terms. Compare Loan Estimates and ask what each option costs over the years you plan to stay.
Can I roll in costs if I already own the lot?
Often, yes. A single-closing loan on a lot you already own is treated as a limited cash-out refinance, and that rule allows financing closing costs, points and prepaids. You still cannot be reimbursed for self-financed overruns, and your LTV must stay within the cap. Everything is subject to lender guidelines and full file review.
If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, VA, conventional and jumbo purchase and refinance loans through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. CFPB: Get to Know Loan Costs
2. Fannie Mae Construction-to-Permanent Financing Summary
3. Fannie Mae Eligibility Matrix
4. Fannie Mae Closing Costs Calculator
5. Fannie Mae Selling Guide: Interested Party Contributions
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Repeat Buyer Get a Conventional Loan With Little Down? · Conventional Cash-Out Refinance for Homeowners Replacing a Loan to Get Cash · Conventional Cash-Out Refinance Fees When You Roll Them Into the Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.