How does a one-time close construction loan work?
A one-time close (OTC) construction loan finances your lot, the construction, and the permanent mortgage in a single loan with one closing. You qualify once up front, funds release to your builder in scheduled draws as the home is built, and at completion the loan automatically converts to a traditional permanent mortgage — no second loan and no second set of closing costs.
Key takeaways
Building a home is exciting, and the financing shouldn't be the stressful part. A one-time close loan lets you handle the lot, the construction, and your permanent mortgage in a single loan and a single closing — so you lock everything in before you break ground and never have to re-qualify partway through.
What is a one-time close construction loan?
A one-time close (OTC) construction loan — also called construction-to-permanent or single-close — finances your lot, the construction, and the permanent mortgage in a single loan with one closing. When the build is finished, it automatically converts to a regular mortgage. No second loan, no second set of closing costs, and no re-qualifying partway through.
One-time close vs. two-time close
| Feature | One-time close | Two-time close |
|---|---|---|
| Closings | One | Two (construction, then mortgage) |
| Qualifying | Once, up front | Twice |
| Closing costs | One set | Two sets |
| Rate risk | Locked up front | Re-priced at the permanent loan |
For most buyers the one-time close wins: you lock your financing before construction starts, so you're protected if rates move during the build.
How it works
- You qualify and close once, before construction begins
- Funds release to your builder in scheduled draws as each phase is completed
- During construction you typically pay interest only on the money drawn so far
- At completion, the loan converts to your permanent mortgage automatically
FHA and VA options
One-time close isn't only for jumbo or conventional buyers — there are FHA and VA one-time-close programs too, which means low or zero down construction financing for eligible buyers. As a broker I can match your build to the right program.
What lenders look for
A licensed builder with a solid track record, complete plans and a fixed-price contract, and the usual credit, income, and reserve review. I'll tell you exactly what your builder and you each need to provide so the file moves smoothly from approval to move-in.
Building in New Hampshire?
If you're buying a lot or building with a contractor, let's get your financing locked before you break ground. Any rates referenced are examples and subject to change until locked.
Frequently asked questions
How does a one-time close construction loan work?
You qualify and close a single time before construction starts. The lender releases money to your builder in scheduled draws as the home is built, you pay interest only on what's drawn, and when the home is finished the loan converts automatically into your permanent mortgage — no second closing.
Is a one-time close better than a two-time close?
Usually, yes. A two-time close means qualifying twice and paying two sets of closing costs, with your permanent rate set only after the build. A one-time close locks everything up front in one closing, protecting you from rate moves during construction. I'll compare both if your situation calls for it.
Is there an FHA one-time close construction loan?
Yes — both FHA and VA offer one-time-close programs that bundle the lot, construction, and permanent mortgage into a single loan. They bring low- or zero-down construction financing to eligible buyers, which most banks' construction loans can't match.
What do you need to qualify for a construction loan?
A licensed builder with a good track record, complete plans and a fixed-price contract, and the standard credit, income, and reserve review. Send me your builder and plans and I'll lay out exactly what's needed and in what order.
How are funds released during construction?
In scheduled draws tied to construction milestones — for example, after the foundation, framing, and so on. The lender inspects progress before each draw, and you typically pay interest only on the amount drawn so far until the home is complete.