Construction-to-Permanent Loans
Finance your build and your mortgage in a single close — one loan, one closing.
Construction-to-Permanent at a Glance
What Is a Construction-to-Permanent Loan?
Building a home is a different process than buying one, and it needs different financing. A construction-to-permanent loan — you'll also hear it called a single-close, one-time-close, or C2P loan — handles the whole thing in one shot. It funds the build, then converts into your regular mortgage once the house is finished. One loan, one closing, one set of paperwork.
That "one closing" part is the real advantage. The older way meant taking out a short-term construction loan, then closing all over again on a separate permanent mortgage when the house was done — two applications, two sets of closing costs, and the risk that rates moved against you in between. A single-close loan collapses that into a single transaction and lets you lock your permanent rate up front, before the foundation is even poured.
During the build, the loan works on a draw schedule. The lender releases money in stages as your builder hits milestones — foundation, framing, rough-ins, drywall, and so on — with an inspection at each step before the next draw goes out. While that's happening, you're typically making interest-only payments on just the money drawn so far. The construction phase usually runs about 6 to 18 months, then the loan automatically converts to your permanent mortgage.
One honest piece of advice before you start: build a cushion into your budget. Construction almost always turns up surprises, and seasoned builders will tell you to plan for costs to run over your estimate.
Who a Construction-to-Permanent Loan Is For
People building a new primary home — whether a custom build on a lot you love or new construction from the ground up. It is the right tool when there is no finished house to buy yet, just plans, a builder, and a vision.
One Closing, Not Two
Covers both construction and the permanent mortgage — saving thousands versus closing twice.
Lock Your Rate Early
Lock your permanent rate at the start, so a rate jump during the build does not blindside you.
Interest-Only While Building
Pay interest only on what has been drawn — keeping costs lower while the home goes up.
Inspected Draw Stages
Funds release in stages tied to completed, inspected work — which protects you.
Automatic Conversion
Converts to a standard mortgage when the home is done — no second application.
Use Your Land
If you already own your lot, its value can often count toward your down payment.
How the Process Works
From plans to move-in, here is what to expect.
Get Pre-Approved
We review your credit, income, builder, and plans, then issue a pre-approval and lock your permanent rate up front.
Finalize Plans & Builder
Your licensed, lender-approved builder provides detailed plans, a budget, and a timeline.
Single Closing
You close once — on both the construction financing and the permanent mortgage together.
Build on a Draw Schedule
Funds release in inspected stages as your builder hits milestones. You make interest-only payments on what is drawn.
Convert to Permanent
When the home is complete, the loan automatically converts to your standard mortgage and normal payments begin.
Estimate Your Payment
Model your permanent payment once the build converts. Enter any rate to estimate it — your real rate comes from your application.
This is an estimate for planning purposes only — not a rate quote, loan offer, or commitment to lend. Your actual rate and payment depend on your full application. Contact us for a personalized quote.
Eligibility
Construction lending asks more of you than a standard purchase, because the lender is financing something that does not exist yet:
- Credit score — generally a minimum around 680, higher than a typical purchase loan.
- Down payment — usually at least 20% (government-backed one-time-close options through FHA and VA can be far lower for those who qualify — FHA from 3.5%, VA potentially $0 down).
- A licensed, lender-approved builder and detailed construction plans, including a budget and timeline.
- Income, employment, and debt-to-income documented like any mortgage.
Because there's no completed home as collateral during the build, rates on construction loans typically run about 1 to 2 percentage points above a standard mortgage. Requirements vary by lender and program, so talk through your plans early.
What Our Clients Say
“Don was incredible to work with throughout my entire home-buying process as a first-time buyer. He was always quick to respond, happy to run different numbers for me, and consistently helped me stay on top of my timelines and due dates.”
Cailyn Hankins
Google Review
FAQs
Construction-to-Permanent FAQs
A regular mortgage funds a finished home in one lump sum at closing. A construction-to-permanent loan funds a home that is still being built, releasing money in stages as the work progresses, then turns into a normal mortgage once it is done. It also requires builder approval, inspections, and a larger down payment.
It is the agreed plan for releasing your construction funds in stages tied to building milestones — foundation, framing, mechanical rough-ins, drywall, final completion. Before each draw, the lender typically sends an inspector to confirm that stage is finished. It protects both you and the lender by making sure money only goes out for work actually done.
No. During construction you generally make interest-only payments, and only on the portion of the loan drawn so far — not the entire approved amount. Your full principal-and-interest payments begin after the loan converts to its permanent phase.
Often, yes. If you already own your lot, its appraised value can frequently be applied toward your down payment, which can meaningfully reduce the cash you need at closing. Confirm how your lender handles land equity.
Single-close loans are built to handle some flexibility — conversion to permanent financing is tied to completion, and lenders can adjust the timeline. This is exactly why budgeting extra time and money up front matters. Delays and overruns are common, so plan for them.
Because the lender is taking on more risk. There is no finished house to fall back on during the build, so they want strong credit, real skin in the game, a qualified builder, and a solid plan before committing.
Let's find the right loan for you
Get pre-approved, or talk through your build with a local loan officer first.