The order to do it in
Talk to a lender first
Ask about construction loans before you shop for land or plans. The lender tells you what kind of loan fits, and that sets your budget for the lot, the house and everything in between.
Find the lot
Check zoning, utilities, sewer or septic, and the flood zone before you buy. The checklist below covers what to ask.
Pick plans that fit the lot
The lot decides a lot: where the house can sit, which way it faces, and whether a septic system changes where you can build.
Get two or three builder bids on the same plans
Same plans, same finishes, so you can compare apples to apples. Check every builder's license before you sign.
Permits, then the build
Your builder pulls the building permit. The lender pays the builder in stages as the work gets done, and you sign off along the way.
Final inspection and move in
The city signs off, you do a final look with the builder, and the construction loan becomes your regular mortgage or gets paid off by one.
How construction loans work
A construction to permanent loan, also called a one time close or single close, covers the build and then becomes your regular mortgage when the house is done. You close once, before construction starts. A two time close uses a short term construction loan first, then a separate mortgage and a second closing at the end.
While the house goes up, the lender pays the builder in stages, called draws, as work is finished. On VA construction loans, for example, the lender needs your written OK before each payment to the builder.
- FHA: one closing before construction starts, to build on land you own or are buying. Equity in land you already own can count toward the down payment.
- VA: one time or two time close. The builder has to be registered with VA, licensed, bonded and insured.
- USDA: single close in eligible rural areas. The builder needs at least two years of experience and a state license. Building it yourself as the contractor isn't allowed.
- Conventional: single close options with construction limited to 12 months at a time and 18 months total.
A lender can tell you which of these fit your situation.
Sources: HUD Mortgagee Letter 2019-08; VA Circular 26-18-7; USDA Rural Development; Fannie Mae Selling Guide B5-3.1-02. Program rules change; confirm with a lender.
Check the lot before you buy it
- Zoning: ask the city whether a home is allowed on that lot and what setbacks apply.
- Sewer or septic: if there's no city sewer, the soil has to be tested and the county health department has to issue a septic permit before the system goes in. Do this before you buy.
- Water and power: find out who serves the lot and whether a new connection is available. Some rural water systems have limited new hookups in certain areas.
- Flood zone: look up the lot on FEMA's flood map.
- Lake lots: TVA shoreline rules and dock permits apply. See my lake homes guide.
- A survey: know exactly where the lines, easements and access are.
Source: Alabama Department of Public Health, before you build.
Utilities by town
- Florence: Florence Utilities (electric, gas, water, sewer)
- Muscle Shoals: Muscle Shoals Electric Board and the Muscle Shoals water and sewer board
- Sheffield: Sheffield Utilities (electric, water, gas, sewer)
- Tuscumbia: Tuscumbia Utilities (electric, water, gas, sewer)
- Out in the county: rural water systems like the East Lauderdale Water Authority serve many areas. Call before you buy to confirm service and connection costs.
Building permits
Your builder usually pulls the permit, but it's good to know who to call.
Outside city limits, and in Killen and Rogersville, call the county or town office to ask what permits apply to your lot.
Checking your builder
In Alabama, anyone building or remodeling a home for more than $10,000 needs a license from the Home Builders Licensure Board. Look up a builder's license or call 1-800-304-0853. If you win a judgment against a licensed builder and can't collect, the board's recovery fund can pay up to $30,000 of actual damages.
Get the contract, plans, allowances and timeline in writing, and have your own inspector check the work at key stages, not only at the end.
Sources: Alabama Home Builders Licensure Board; HBLB recovery fund.
Buying a new build that's already going up
If you'd rather skip the lot hunt, some new homes in the Shoals are sold before or while they're being built. The builder's sales staff works for the builder. Your own agent works for you on price, upgrades, the contract and inspections. See what's for sale now.
Property taxes on a new home
Once you live in it, an owner occupied home is assessed at 10% of its value in Alabama. Apply for your homestead exemption at the county once you move in. Before that, a lot is generally taxed at the higher 20% rate. More on my property tax page.
Source: Alabama Department of Revenue.
Common questions
Do I go to the bank or the builder first?
Most people start with a lender. The loan type and budget decide which lots and plans make sense, and some builders ask for a lender letter before they bid.
What is a construction to permanent loan?
One loan with one closing that pays for the build and then turns into your regular mortgage when the house is finished. A two time close uses a construction loan first, then a separate mortgage and a second closing. FHA, VA, USDA and conventional loans all have single close options. A lender can tell you which ones fit you.
Does land I already own help?
It can. Under FHA rules, equity in land you own can count toward the required down payment. Land owned six months or less counts at the lower of what you paid or the appraised value; land owned longer counts at appraised value. Ask your lender how it works for your loan.
Does my builder need a license in Alabama?
Yes, for home building or remodeling over $10,000. Look up any builder on the Alabama Home Builders Licensure Board site or call 1-800-304-0853. Owners building their own home to live in are exempt.
What if the lot has no city sewer?
You need a septic permit from the county health department before the system goes in, and the soil has to be tested first. Check this before you buy the land, because the soil can decide whether and where you can build.
Do I need my own agent to buy a new build?
You don't have to have one, but the builder's sales staff works for the builder. Your own agent works for you on price, upgrades, contract terms and inspections. Under rules in effect since August 2024, you'll sign a written agreement with an agent before touring with them.
General information, not legal, lending, tax or engineering advice. Loan programs, permits and fees change; confirm with your lender, the city or county, and your builder. Updated September 30, 2026.