Single Close Construction Loans
Building your own home can feel like a dream come true. It allows you the flexibility to create the home you want in a location of your choosing.
Moving forward with a new build is a big decision and a big commitment. With a single close construction loan, we simplify the process for you with financing designed specifically to streamline building a new home.
What is a Single Close Construction Loan?
With a single close construction loan, you can finance both the construction of your new home and the long-term mortgage that will be needed to afford your home once it’s built.
This streamlines the process, allowing you to close on your home loan once, rather than having to secure two or more separate loans for the property, construction, and home financing.
You qualify once and have a single appraisal, loan originator, and closing process. This reduces the time it takes to build and move into your new home, protects you from unforeseen circumstances down the road, and saves you from paying double the closing costs.
With other loan options, financing new home construction has been notoriously difficult. Buyers had to find a way to finance the land, construction project, and home. In many cases, this required getting two or three loans.
Home construction is complicated and requires many moving parts. Single close construction loans are made to help simplify the process.
Qualifying for a one-time close construction loan is no more complicated than qualifying for a conventional home loan, depending on your overall financial health and risk level.
How Single Close Construction Loans Work
If you’d like to see whether you qualify for a single close construction loan, connect with us. To get you started, we’ve outlined the steps needed and loan programs available to help you understand the process.
The Financing Process
Get in touch with us to see if we can start the process to finance the construction of your new home.
- Choose a builder: Find a reputable builder in your area who meets eligibility requirements for financing, including 3 years minimum experience building residential homes, a minimum of $1 million per year in volume, and that their primary business is building residential homes.
- Prepare a contract: We’ll work with you as you prepare a contract with your builder to determine if the home is within your budget and what the cost and timeline will be to build your home and finance it.
- Begin the loan process: Once you review and sign the contract, it will be evaluated by our construction underwriting team. Signing the contract and providing needed documentation usually take only a few days.
- Underwrite the loan: Our underwriting team will evaluate and potentially approve the loan for the construction process, as well as the permanent portion of the loan in one single step.
- Close the loan: With a final review of all the financial information you submitted, including documentation of current income and financial liabilities, you can sign the paperwork to close on your loan and secure financing.
- Begin construction: You’ll begin construction on your new home within 30 days of the closing date. Your construction team will provide you with regular updates on the progress of your home. We’ll manage the construction phase, including ordering draw inspections and any state-required surveys and inspections.
Single Close Construction Loan Program Options
We offer specialized loan programs to meet various borrower needs. Each loan program is government-backed, meaning we follow standard rules for fees, interest rates, and how funds are used.
Government backing allows borrowers to secure financing with low or no down payments and even low credit scores, as long as you meet standard eligibility requirements.
All of our available loan programs can be used to finance new home construction. We also work with homebuyers to finance land if you don’t already have a lot to build on.
Learn more about each of our single close construction loans available.
U.S. Department of Agriculture (USDA) Single Close Construction Loans
A USDA single close construction loan, also known as a rural development loan, is available in certain rural and suburban areas. These 30-year fixed-rate mortgage loans don’t require a down payment. Buyers can even finance their closing costs, minimizing additional expenses beyond the home’s upfront cost.
Veterans Administration (VA) Single Close Construction Loans
Available to qualified veterans, active military, and their eligible surviving spouses, a VA single close construction loan equips you to build, buy, repair, retain, or adapt a home. No down payment is required, closing costs are limited, and you aren’t charged a penalty for paying the loan in advance.
Federal Housing Administration (FHA) Single Close Construction Loans
FHA Single Close Construction loans are designed for low- and moderate-income buyers and are especially popular for those seeking to build a starter home. They require lower down payments and lower credit scores than a conventional loan package.
Fannie Mae Single Close Construction Loans
Fannie Mae is a government-sponsored company that guarantees loans, allowing lenders to extend loans to lower-income home buyers with reduced risk. The Fannie Mae Single Close Construction loan program mandates a minimum credit score of 680 for fixed-rate loans applied to single-family homes.
Single Close Construction Loan FAQs
Financing the build and long-term mortgage of your new home is an important step in beginning this process. It’s ok to have questions. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.
Single close construction loans apply to a wide range of property types. When you connect with us, we’ll discuss whether your property and build type will qualify.
Below are common property types we’re able to finance with single close construction loans:
Single family residences
“Build on your lot”
Credit is one factor used to decide how much you can finance with a single close construction loan.
The minimum requirements vary depending on the loan program. In many cases, a credit score of 640 or higher is often best. A credit score of 700 or above is considered low risk, while a score of 800 to 850 is exceptional.
We will examine your entire financial outlook and work with you to find a loan solution that meets your needs, considering many factors including your credit score, current income, and investments.
Whether you need a down payment for your loan depends on the specific loan program you decide to use.
Our single close programs offer down payments anywhere from 0-3.5% to a maximum of 5%. This is a small fraction of what other lenders typically ask for with traditional construction loans, which require a down payment of around 20% to get the best loan terms.
Interest rates for single close construction loans vary based on a variety of factors including your credit score, the location where you want to build, your loan type, and loan amount.
To know what interest rate your situation would qualify for, get in touch with one of our loan advisors for more specific information.
Most of the lending process will be handled for you behind the scenes by our team and your builder. You’ll just want to be ready to discuss your needs with your builder and read contracts closely at each stage of the process. We’re always here to help.
With a single close construction loan, you receive both an interim construction loan and a 30-year permanent loan at the same time. You get a single promissory note and one deed of trust. You’ll sign the 30-year amortizing promissory note at closing.
Once the promissory note is signed, any liens on the land will be automatically paid off. A draw amount will be made available to the builder so construction can start right away.
When the project is complete, you’ll receive a loan modification to amend the date for first payment. After the loan modification is signed, the 30-year amortizing loan works like any other home loan with fixed interest rates.
We have an in-house single close construction management team. Using our years of experience and home-building expertise, our experts review and approve documentation from every stage of construction.
This includes project budget and timeline, planning and specifications, permits and inspection, and building code best practices.
At the start, you’ll want to find and engage the builder of your choice as long as they meet the quality standards for our program. Our builder vetting process ensures that all builders accepted into our program have a sterling record of on-time completion for their home projects. Quality, safety, and efficiency are our top priorities.
Our team will help keep your project on track every step of the way. This allows potential problems to be dealt with before they can turn into major delays.
Our completely hands-free building process means you never need to worry about applying for building permits or arranging inspections as your construction takes shape. It is all handled for you. The documentation you might need in the future is centralized all in one place.
Single close construction loans have other names as well.
As you work with builders and lenders, you might hear single close construction loans referred to as single close loans, construction-to-perm loans, one-time close loans, construction conversion loans, CTP loans, or even all-in-one loans.