Construction-to-Permanent Loans: Build Your Home With One Loan
A construction-to-permanent loan, also called a one-time close loan, finances the build and converts to your permanent mortgage with a single closing. You avoid a second set of closing costs and a second approval when construction ends.
How does a construction-to-permanent loan work?
1. Approval. You’re qualified as a borrower, and the project is reviewed: plans, budget, builder and permits.
2. Construction phase. The lender releases money in draws as work is completed and inspected. During this period you typically pay interest only on what’s been drawn.
3. Conversion. When the home is finished, the loan converts to a permanent mortgage without a new closing.
Why choose one loan instead of two?
With a separate construction loan and a later mortgage, you close twice, pay two sets of costs and have to qualify again at the end. If your finances or the market change during the build, that second approval can be a risk. One-time close removes it.
Who does this fit?
• You own land and want to build on it
• You’re buying a lot and building
• You’re rebuilding on an existing lot
What does the lender look at?
Beyond your credit, income and assets, expect the lender to review:
• The plans and budget. Detailed and realistic.
• The builder. Licensing, experience and financial strength.
• The as-completed appraisal. Based on the plans and specs.
• Your down payment or land equity. Requirements vary by program.
• Reserves and contingency. Most projects run over budget.
What are the common mistakes?
• Starting with a builder before checking financing
• A budget with no contingency
• Underestimating soft costs like permits, utilities and site work
• Not asking what happens to your rate during construction
Ask about rate lock options early. How long a rate is protected, and what happens if construction runs long, differs by program.
What should you do first?
Get pre-approved before you finalize plans. That way you know your budget before you hire anyone, and the plans match what you can qualify for.
Thinking about building? Talk to us before you sign with a builder
Mike Belfor, Branch Manager and Mortgage Loan Originator, American Pacific Mortgage, NMLS 264700 (Company NMLS 1850). Equal Housing Opportunity. Program requirements vary. Updated September 18, 2026.
Comments