What Is a Construction-to-Permanent Loan?

A construction-to-permanent loan funds the construction of your home in stages, then converts into a traditional mortgage when the home is finished. One application, one closing, one set of closing costs. It's the loan most of our clients use, and it's often called a one-time close or single-close loan.

The two phases

Phase one: construction

• Funds are released in draws as work is completed and verified, not as a lump sum
• You typically pay interest only, and only on what has been drawn so far
• Payments start small and grow as the home progresses
• Your rate during construction may be variable, depending on the program

See how draws work.

Phase two: permanent

• At completion, the loan converts to a standard mortgage
• Payments become principal and interest on a fixed term
• No second closing, no second set of title and origination fees

See what happens at conversion.

Why people choose it

• One closing. You pay title, origination and appraisal once rather than twice.
• Rate certainty earlier. Many programs let you lock the permanent rate up front, which removes the risk of rates moving during a nine month build.
• One approval. You qualify once, at the start, rather than having to re-qualify at completion.
• Lower payments during the build, which matters if you're also paying rent or an existing mortgage.

Where it can be less flexible

Because you commit to a permanent product up front, you can't shop the market for a mortgage at completion the way you could with a construction-only loan. Whether that matters depends on where rates go and how much you value the certainty.

What lenders will want

Approved plans and specifications, a signed build contract with a fixed price, a builder they'll approve, your lot information, and standard income, asset and credit documentation. See credit requirements and down payment.

We work with lenders who specialize in construction loans. See our financing page.