Mortgage rates rose through 2026. Freddie Mac’s 30 year average dipped to 5.98% in late February and stood at 7.03% on September 24, a week after the Federal Reserve raised its benchmark rate. On a one time close construction loan you usually lock the permanent rate before construction starts, for as long as the build takes, and pay interest only on the money drawn until the house is finished.
We are a builder, not a lender, and we do not forecast rates. This guide explains how the mechanics work so you can ask your lender the right questions. Terms vary by lender and program.
Where are rates in fall 2026?
Freddie Mac’s weekly survey of average fixed mortgage rates (Freddie Mac):
| Week | 30 year fixed | 15 year fixed |
|---|---|---|
| September 25, 2025 | 6.30% | 5.49% |
| January 8, 2026 | 6.16% | 5.46% |
| February 26, 2026 | 5.98% | |
| September 24, 2026 | 7.03% | 6.42% |
The February reading was the first below 6% in about three and a half years. Since then the direction has been up, and on September 16, 2026 the Federal Reserve raised its target range by a quarter point, to 3.75% to 4% (Federal Reserve). Its remaining 2026 meetings are October 27 and 28 and December 8 and 9.
Keep in mind that the survey average describes a typical purchase loan. Your construction loan rate depends on the program, your credit, your down payment, the lock length and the lender.
How does a rate lock work on a construction loan?
It depends on how the loan is structured:
| Structure | When the permanent rate is set | Your exposure while you build |
|---|---|---|
| One time close, locked at closing | Before construction starts | Little, as long as the lock covers the build |
| USDA single close | Must be locked before closing (7 CFR 3555.105) | Little |
| Fannie Mae single close | At closing, and the rate, amount or term can be modified at or before conversion (Fannie Mae) | Depends on the lender’s lock terms |
| Two time close | At the second closing, when the house is finished | Full: the permanent rate is whatever the market offers then |
The lock has to cover the whole build, so construction loans use extended locks. Lenders commonly offer them in steps such as 180, 270 or 360 days, and a longer lock generally costs more, through a fee or a slightly higher rate. With about six months of construction after closing, the lock length is not a detail: ask what happens, and what it costs, if the build runs past it.
What is a float down, and is it worth paying for?
A float down lets you take a lower rate once if rates fall after you lock. Lenders that offer one set three terms: how far rates must drop, often a quarter point; when you can use it, usually a window near closing or conversion; and what it costs, sometimes a fraction of a point.
It works like insurance: a known cost for protection against an unknown move. Whether it is worth it depends on your budget and how long you plan to keep the loan, which is a conversation for your lender. Get the trigger, the window and the fee in writing.
What do I pay while the house is being built?
During construction you typically pay interest only on what has been drawn. When the home is finished, the CFPB explains, the payment switches to principal and interest.
An illustration using our typical draw schedule, a $250,000 loan and a hypothetical 7% rate, before taxes and insurance:
| After this draw | Drawn so far | Monthly interest, about |
|---|---|---|
| Foundation, about 15% | $37,500 | $219 |
| Framing and roof, about 25% | $100,000 | $583 |
| Rough ins, about 20% | $150,000 | $875 |
| Insulation and drywall, about 15% | $187,500 | $1,094 |
| Finishes and trim, about 15% | $225,000 | $1,313 |
| Final, about 10%, then conversion | $250,000 | Principal and interest of about $1,663 on a 30 year loan |
Some lenders collect construction interest monthly; others build an interest reserve into the loan. Our financing guidance page explains each draw, and Nadia Benavides, our transaction coordinator, prepares the draw requests so funding does not stall.
How can I protect my budget while rates move?
- Get prequalified early. It costs nothing, takes one to three business days, and shows the payment at today’s rate.
- Finish decisions before you lock. Design, selections and, with many lenders, the permit before closing shorten the time the lock has to cover. Our how we build page shows that order.
- Choose the lock length from the real schedule. About six months of construction after closing, plus a margin for weather and inspections.
- Keep your finances steady during the build. New debt or a job change can complicate a conversion, and a two time close requalifies you at the end.
- Ask about a float down, its trigger, window and cost.
- Lock your house price too. With us, your price is locked once your contract is signed and selections are finalized, so the rate is the only moving number.
Frequently asked questions
Should I wait for rates to drop before building?
That is a decision about your family’s budget, not a forecast anyone can make for you. What we can tell you: construction runs about six months after closing, an extended lock sets the rate once, and a mortgage can be refinanced later if rates fall and it makes sense then. A lender can show you the payment both ways.
Is my locked rate charged during construction?
It depends on the lender. Some charge interest at the locked rate on the drawn balance; others use a separate construction rate until conversion. Ask which applies before you sign.
What if construction runs past my lock?
Most lenders offer lock extensions for a fee. Choosing the lock length from a realistic schedule, and keeping selections on time, is the best way to avoid needing one.
Which loan programs offer a single closing?
FHA, VA, USDA and conventional loans can all be structured as one time close construction to permanent loans, though not every lender offers every program. Our loan comparison and USDA guide cover each one.
Want to see your numbers at today’s rates? Get prequalified or schedule a consultation, and we will line up the schedule and the lock with your lender.
