Quick Answer
A one-time close construction loan—also known as a single-close construction mortgage—combines your construction financing and permanent mortgage into one simplified package with a single closing.
A two-time close loan requires two separate closings—one for construction, and one for permanent financing—meaning more paperwork, cost, and credit checks, but potentially more flexibility.
Get qualified for a single-close loan with GO Mortgage’s streamlined application.
What is a one-time close construction loan?
A one-time close construction loan is a single mortgage transaction that covers both the construction phase and the permanent financing phase of building your new home. You only close once, locking in your mortgage terms before construction begins.
This type of loan is also known as a construction-to-permanent loan or a single-close construction loan.
Key features of one-time close construction loans:
- One loan application, one underwriting process, and one closing
- Fixed interest rate can be locked before construction starts
- You only pay closing costs once
- Loan automatically converts to a traditional mortgage once construction is complete
This streamlined process simplifies home construction financing, especially for first-time homebuilders or buyers with limited experience managing multiple loan phases.
What is a two-time close construction loan?
A two-time close construction mortgage (also known as a two-close construction loan) is a financing structure that involves two separate loan transactions.
The first loan is a construction-only loan, which funds the building process. The second is a separate mortgage that pays off the construction loan and becomes your permanent home financing.
Key features of two-time close construction loans:
- Two separate closings: one before construction, one after it’s complete
- The construction loan typically lasts 6–12 months
- You’ll reapply, requalify, and pay closing costs again for the permanent mortgage
- Interest rates may differ between phases
This type of loan gives borrowers the flexibility to shop for the best permanent mortgage later, but may involve more costs and risks.
Key differences to compare construction loan types: one-time vs. two-time close
| Feature | One-Time Close | Two-Time Close |
| Number of closings | One | Two |
| Loan phases | Combined (construction + mortgage) | Separate loans |
| Interest rate lock | Locked before construction | Locked before second closing |
| Credit approval | One-time qualification | Qualification required twice |
| Closing costs | Paid once | Paid twice |
| Risk of requalification | None | Yes (job change, credit drop) |
| Flexibility | Less flexible | More customizable after build |
| Timeline complexity | Simpler | More steps and paperwork |
The biggest distinction is in timing and risk: one-time close loans offer predictability, while two-time close loans offer flexibility.
Pros and cons of construction loans: Which type fits your needs?
One-time close construction loans pros:
- Single application and approval process
- One set of closing costs
- Lower risk of loan denial after construction
- Lock in your interest rate early
Cons:
- Less flexibility to change lenders or loan terms
- May have stricter loan requirements upfront
One-time close construction loans are often ideal for borrowers who want predictability and simplicity throughout the construction and mortgage process.
Two-time close construction loans pros:
- Choose your permanent mortgage lender after construction
- Ability to refinance based on updated home value
- More time to compare rates, terms, and loan types
Cons:
- Two closings mean higher total closing costs
- Risk of being denied for the second loan
- Must requalify based on updated credit, income, or job status
Two-time close loans are best suited for borrowers who prioritize flexibility and are confident in their financial stability throughout the build.
When should you choose a one-time close construction loan?
Choose a one-time close construction loan if you:
- Want a simplified process with fewer moving parts
- Prefer to lock in your rate early and avoid market shifts
- Expect no significant changes in income, credit, or employment
- Want to avoid paying closing costs twice
Borrowers building primary residences or working with approved builders often benefit most from a one-time close structure.
When should you choose a two-time close construction loan?
A two-time close construction loan may be right if you:
- Are building a custom or complex home with potential design changes
- Expect a higher home value upon completion and want better mortgage terms
- Need flexibility in timing or want to refinance immediately after building
- Prefer to shop lenders or compare products after construction
This option is frequently used by real estate investors or buyers who want to maximize control over each phase of financing.
How the construction loan process works
Regardless of loan type, construction loans follow a structured draw schedule.
General steps:
- Loan approval and closing (either once or twice)
- Builder receives funds in stages, called draws
- Inspections verify each stage is complete
- Interest-only payments during the construction period
- Final inspection and certificate of occupancy
- Loan converts or is replaced by a permanent mortgage
Understanding your lender’s disbursement and inspection process is key to a smooth build.
FAQ: One-time close vs. two-time close construction loans
Q: Do I pay more in closing costs with a two-time close loan?
A: Yes. You pay closing costs twice: once for the construction loan and again for the permanent mortgage.
Q: Can I refinance after using a one-time close loan?
A: Yes, but not immediately. One-time close loans become a permanent mortgage, so you’d follow standard refinance rules later.
Q: Does my credit get checked twice with a two-time close loan?
A: Yes. You must qualify separately for both the construction loan and the permanent loan. Any drop in credit can affect approval.
Q: What happens if construction is delayed?
A: Delays may extend the interest-only payment period. For two-time close loans, you may need to request an extension or reapply for the loan.
Q: Which loan type is better for custom homes?
A: Two-time close loans offer more flexibility for custom builds, allowing you to adapt financing to changes in scope or value.
Which construction loan is right for you?
The primary difference between a one-time close and a two-time close construction loan lies in convenience versus flexibility.
If you want to lock in your rate, simplify the process, and avoid closing twice, a one-time close construction loan is likely your best fit. If you prefer to shop lenders later or expect changes during the build, a two-time close loan may provide the control you need.
Either way, understanding how each loan type works can help you build your dream home with confidence.
See if you qualify for a single or two-time close loan with GO Mortgage’s streamlined application.