Quick Answer
A one-time close construction loan simplifies your dream home build by combining your construction financing and permanent mortgage into one loan with a single closing. This structure saves time, reduces costs, and eliminates the risk of requalification after the construction is complete.
What is a one-time close construction loan?
A one-time close construction loan, also known as a construction-to-permanent loan, is a mortgage that combines the cost of building your home with your long-term mortgage into a single transaction.
This type of loan is designed to simplify the homebuilding process for buyers by requiring only one loan approval, a single set of closing costs, and a single closing day.
After the construction phase is complete, the loan automatically converts into a permanent mortgage, typically with a fixed interest rate. You do not have to reapply, requalify, or pay closing costs again.
See if you qualify for a one-time close construction loan with GO Mortgage’s team.
Top benefits of a one-time close loan
Using a one-time close construction loan offers several key advantages, especially for homebuyers planning to build a primary residence. These benefits include:
1. One closing, fewer costs
You pay closing costs only once, which can save thousands compared to a two-time close loan. There’s no need to budget for additional lender fees, appraisal costs, or title services after construction.
2. Locked interest rate
One-time close construction loans typically allow you to lock in your mortgage rate before construction starts, protecting you from market increases during the build.
3. No requalification needed
With a single-close loan, you only qualify once, at the beginning of the process. You won’t risk losing your mortgage approval if your income, credit score, or job situation changes during construction.
4. Streamlined process
By bundling the construction loan and permanent mortgage, you eliminate the need for duplicate paperwork, underwriting, and approvals. This makes the loan process faster and more predictable.
5. Simplified builder payments
The lender sets up a draw schedule, releasing funds to the builder at key construction milestones. These draws are managed directly through the lender, with inspections verifying progress.
6. Interest-only during construction
During the build, you’ll usually make interest-only payments on the funds disbursed. Full mortgage payments begin only after the loan converts to a permanent mortgage.
These advantages make a one-time close loan an efficient financing option for turning your dream home into reality.
How a one-time close construction loan works
Understanding how this type of loan is structured can help you prepare for the homebuilding journey.
Step-by-step process:
- Apply and get pre-approved for the one-time close loan
- Lock in your interest rate and close on the loan
- Begin construction—your lender disburses funds to the builder in phases
- Make interest-only payments during construction
- Once the home is complete and inspected, the loan converts to a permanent mortgage automatically
Unlike a two-time close loan, there is no second application, second appraisal, or second round of closing costs.
Who benefits most from a one-time close loan?
This loan option is particularly useful if you:
- Are a first-time homebuilder or buyer looking to avoid unnecessary complications
- Want to secure your mortgage terms upfront
- Expect your income or credit to remain stable during the construction period
- Prefer a predictable budget with minimal financial surprises
- Are building with a qualified or approved builder using standard construction timelines
Borrowers building a primary residence with standard specifications often benefit most from this financing structure.
Common concerns about one-time close loans
While the benefits are significant, it’s worth considering a few potential limitations:
- Less flexibility: You’re locked into your mortgage terms from the start, which limits your ability to shop for better rates post-construction.
- Upfront qualification standards: Lenders may require stricter income verification, a higher credit score, or a more detailed builder contract.
- Limited property types: Most one-time close loans are for owner-occupied primary residences. Investment properties or unique home designs may not qualify.
If your financial situation is expected to improve during the construction period, or you plan to refinance immediately after, a two-time close loan may be a better option.
One-time close vs. two-time close: At a glance
| Feature | One-Time Close Loan | Two-Time Close Loan |
| Number of closings | One | Two |
| Loan structure | Construction + permanent | Separate construction and mortgage |
| Closing costs | Paid once | Paid twice |
| Interest rate lock | Before construction | Before permanent loan |
| Qualification | One-time approval | Must qualify twice |
| Process complexity | Streamlined | More paperwork and steps |
| Flexibility | Lower | Higher |
For many borrowers, the simplicity and security of a one-time close loan make it the better choice, especially if building timelines and budgets are tight.
FAQ: Benefits of using a one-time close construction loan
Q: Can I use a one-time close loan to finance land and construction together?
A: Yes. Many one-time close loans allow you to finance the land purchase and the home construction in one combined loan.
Q: What is the typical down payment for a one-time close loan?
A: Down payments can range from 5% to 20%, depending on the loan type (FHA, VA, or conventional) and your credit profile.
Q: Is my builder required to be approved by the lender?
A: Yes. Most lenders require you to use a licensed and approved builder to ensure quality and financial compliance.
Q: Can I make changes to the home design after closing?
A: Changes may be limited once the loan closes. Speak with your lender and builder early to avoid delays or complications.
Q: What happens if construction is delayed?
A: Most lenders allow a 12-month construction window. Delays may necessitate extensions, which may incur additional fees.
Conclusion: Build your dream home with confidence
A one-time close construction loan offers a significant advantage for homebuyers who want to simplify the process of building their dream home.
By merging the construction loan and mortgage into one process, you can avoid multiple closings, protect your interest rate, and reduce your financial risk.
If you’re ready to break ground on your future home, start your one-time close loan application with GO Mortgage today.