Construction Loan Rates in Texas — 2026

Construction loan rates in Texas are higher than permanent financing — that’s normal and expected. You’re borrowing against a property that doesn’t yet exist as full collateral, for a shorter term, with more moving parts for the lender to underwrite. Here’s exactly what drives your rate, what to expect at each stage, and how to get the best number on your project.

Current Construction Loan Rates (Texas)

Loan Type	Rate Range	Typical LTC	Term
Commercial Construction	Quoted on your deal	Up to 75%	12–24 months
Residential Construction	Quoted on your deal	Up to 80%	9–18 months
Fix & Flip / Rehab	Quoted on your deal	Up to 75%	6–12 months
Mixed-Use Construction	Quoted on your deal	Up to 75%	12–24 months

Rates are estimates based on current market conditions and typical borrower profiles. Your actual construction loan rate depends on the factors below — call 877-895-3634 for today’s exact rate on your specific project.

What Determines Your Construction Loan Rate

Construction loan rates aren’t one-size-fits-all. Lenders price each deal individually based on:

• Borrower experience — a developer with a track record of completed projects gets a better rate than a first-time builder. Prior construction or development experience is the single biggest rate lever.
• Loan-to-cost (LTC) and loan-to-ARV — the more equity you put in, the lower your rate. A deal at 60% LTC prices better than the same deal at 80% LTC.
• General contractor quality — a licensed, bonded GC with a commercial track record reduces execution risk in the lender’s eyes, which shows up in the rate.
• Loan type — ground-up construction on raw land prices higher than a gut rehab of an existing structure, which prices higher than a build-to-suit backed by a signed tenant lease.
• Exit strategy — a clear take-out (permanent refinance, pre-arranged sale, signed lease) reduces perceived risk and can shave points off your rate versus an undefined exit.
• Loan size — larger, institutional-quality projects often see more competitive pricing than smaller deals, simply due to lender overhead economics.
• Credit and financial strength — construction lending is asset- and project-driven more than most commercial financing, but borrower credit and liquidity still move the needle, especially on rate versus a marginal deal.

Fixed vs. Floating Construction Loan Rates

Most construction loans carry a floating rate tied to an index like Prime, adjusting as the underlying benchmark moves over the build period. This is standard in the industry — a construction loan is short-term by design, so locking a fixed rate for 12-24 months carries less practical benefit than it would on a 30-year permanent loan, and floating structures are typically what construction lenders offer. Some lenders will quote a fixed-rate construction-to-permanent product where the rate is set once at closing and carries through the construction period into the permanent loan — worth asking about specifically if payment certainty during the build matters more to you than chasing the lowest possible starting rate.

Why Construction Loan Rates Run Higher Than Permanent Financing

A permanent commercial mortgage is secured by a finished, income-producing, appraised asset. A construction loan is secured by a hole in the ground and a set of plans. That gap in collateral certainty is exactly why construction loan rates sit meaningfully above 30-year fixed commercial rates — the lender is underwriting completion risk, cost-overrun risk, and market risk on top of standard credit risk, all before the property exists to generate income or support a traditional appraisal. The rate premium compresses back down the moment your project reaches certificate of occupancy and you refinance into permanent financing.

Construction Loan Structure

Construction loans are draw-based and interest-only during the build phase — you only pay interest on funds actually drawn, not the full committed loan amount, which keeps carrying costs manageable while the property isn’t yet producing income. Funds release in stages (typically 4-6 draws) as verified milestones are completed and inspected: foundation, framing, rough mechanical/electrical/plumbing, drywall and finishes, and certificate of occupancy. Once construction is complete, you either refinance into permanent financing or pay off the loan from a sale.

Construction Loan Rate FAQ

Can I lock my construction loan rate?
Most construction loans float with the market during the build period, so a traditional rate lock isn’t standard. If rate certainty matters, ask about a construction-to-permanent product that sets the rate once at closing.

Do construction loan rates change during the build?
Yes, if your loan floats with an index like Prime — your rate adjusts as the benchmark moves. Fixed construction-to-permanent structures avoid this by setting the rate up front.

What credit score do I need for the best construction loan rate?
There’s no single cutoff, but stronger credit combined with real development experience and solid equity in the deal consistently earns better pricing than a marginal borrower profile with the same project.

Are construction loan rates negotiable?
Yes — rate is one of several deal terms (LTC, term, draw schedule, fees) that can move based on the strength of your project, your experience, and how much equity you bring. A written Letter of Intent lets you see and compare real terms before committing.

Does a bigger down payment lower my construction loan rate?
Generally yes. Lower LTC means less lender risk, and lenders typically reward that with better pricing, alongside a faster path to approval.

Get Construction Financing

Call 877-895-3634 with your project details — property, plans status, total project cost, and your contractor. We’ll quote you a real construction loan rate and tell you exactly what documents we need. No upfront fees.