Quick Answer
A one-time close construction loan works by combining the costs of land, construction, and your permanent mortgage into a single loan with a single closing. After you apply and close, funds are released in stages as the home is built, and your loan automatically converts to a traditional mortgage when construction is complete.
A step-by-step guide to one-time close construction loans
A one-time close construction loan is a single mortgage that covers the cost to build a new home, including the land, construction, and permanent mortgage, under one closing.
That means you only apply and close once, even though you’re financing multiple stages of the project.
This article guides you through the process, from prequalification to your final mortgage, in a simple, borrower-friendly format. Whether you’re building a modular home, a custom residence, or a home on land you already own, this guide will show what to expect at each step.
Apply for a single-close construction loan with GoMortgage
What makes a one-time close loan different
With a traditional two-time close loan, you must:
- Qualify for and close on a short-term construction loan
- Reapply for and close on a second loan to convert it to a permanent mortgage
In contrast, a one-time close loan:
- Closes only once before construction starts
- Locks in your interest rate from the beginning
- Automatically converts to a permanent mortgage when the home is completed
It simplifies the process, reduces risk, and saves on closing costs.
Step-by-step process: How one-time close construction loans work
| Step | Description |
| 1 → Prequalification | You meet with a lender to discuss your budget, loan options (including FHA, VA, and conventional), and your credit profile. This helps determine if you qualify and how much you can borrow. |
| 2 → Select loan program | Your lender will match you with the right one-time close loan based on your down payment, credit, and whether you’re eligible for FHA or VA home loan programs. |
| 3 → Choose your builder | You select a licensed and insured builder. Most loan programs require the builder to be vetted and approved by the lender. |
| 4 → Submit plans and specs | You and your builder submit detailed home plans, blueprints, and cost estimates. The lender uses these to order an appraisal. |
| 5 → Home appraisal | An appraiser estimates the future value of the completed home based on your plans and local comparables. This determines how much you can borrow. |
| 6 → Final loan approval and closing | Once underwriting is complete, you sign one set of documents covering the land (if needed), construction, and the long-term mortgage. |
| 7 → Construction begins | The builder starts work. Funds are released in stages (draws) after inspections verify progress. |
| 8 → Final inspection and occupancy | Once the home is complete, a final inspection ensures everything meets local codes. You receive a certificate of occupancy. |
| 9 → Mortgage conversion | The loan automatically converts into a permanent mortgage (fixed-rate or adjustable, based on your original terms). No second closing is required. |
What to know about construction draw schedules
Once construction begins, your lender won’t release all the funds at once. Instead, the loan is disbursed in stages through a construction draw schedule.
This schedule outlines when and how your builder will receive payments as the project reaches specific milestones.
Typical draw stages include:
- Initial land purchase or payoff
- Foundation completion
- Framing and roofing
- Electrical and plumbing rough-ins
- Interior finishing (drywall, flooring, fixtures)
- Final completion and inspection
At each phase, the lender sends an inspector to verify progress before releasing the next installment of the payment. This protects both you and the lender by ensuring the home is being built to plan and budget.
Why this matters
Understanding the draw process helps you stay on schedule, avoid miscommunication with your builder, and ensure your project stays within budget. Your lender and builder must work together closely, so selecting experienced professionals is essential for a smooth construction loan experience.
Benefits of one-time close construction loans
One-time close loans provide significant advantages for homebuilders:
- Only one closing means fewer fees and no need to requalify
- A rate lock protects you if interest rates rise during construction
- Simple process for combining land, build, and mortgage into one loan
- Available with FHA, VA, and conventional loan options
- Ideal for modular, custom, and stick-built homes
This loan type is particularly beneficial for first-time homebuyers, veterans, and individuals who prefer a simplified financing solution.
FAQs: One-time close construction loan process
Q: How long does it take to close on a one-time close construction loan?
A: Most lenders close one-time close loans in 30 to 45 days after receiving full documentation. The timeline depends on builder readiness, permit status, and loan program requirements.
Q: Can I use this loan to buy land and build?
A: Yes. One-time close loans can include land acquisition, site prep, and full construction costs. If you already own land, that equity may reduce your required down payment.
Q: What kind of homes can I build?
A: One-time close loans support modular homes, custom-built homes, and some manufactured housing, as long as the property meets permanent foundation and local code requirements.
Q: Is my interest rate fixed before construction starts?
A: Yes. Your mortgage rate is typically locked at the time of closing, before construction begins. This protects you from rate increases during the build.
Q: Do I need to refinance after construction?
A: No. The key benefit of a one-time close loan is that the construction financing automatically converts into a permanent mortgage once the home is completed, eliminating the need for a refinance.
Build smarter with a single-close construction loan from GO Mortgage
A one-time close construction loan can streamline your path to a new home by bundling everything into one efficient package. Whether you’re building in the suburbs, on rural land, or planning a modular home, GO Mortgage can guide you through every step—from builder selection to your final mortgage.
We help borrowers:
- Compare FHA, VA, and conventional one-time close options
- Prepare construction plans for approval
- Coordinate with builders and appraisers
- Simplify the draw schedule and inspections
- Avoid the complexity of two-time close loans
Take the next step toward your dream home. Get started today with GoMortgage and discover how easy building can be with the right loan.