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Building a Home in 2027? How One-Time Close Construction Loans Work
Building a Home in 2027? How One-Time Close Construction Loans Work
Building a home gives you the opportunity to
choose your floor plan, finishes, layout,
and features instead of purchasing an
existing property.
But before selecting a builder or purchasing
land, one of the most important questions
is how you plan to finance construction.
Good news for future homeowners:
You may not need two separate mortgage loans
to build your dream home.
A One-Time Close Construction Loan
can combine eligible land costs,
home construction, and your permanent
mortgage into one financing transaction.
Depending on your qualifications, options
may include FHA, VA, USDA, or conventional
construction-to-permanent financing.
What Is a One-Time Close Construction Loan?
A One-Time Close Construction Loan,
also known as a single-close
construction-to-permanent mortgage,
provides financing for construction
and permanent homeownership through
one closing.
With traditional two-close construction
financing, borrowers may obtain
a short-term construction loan
and then refinance into a permanent
mortgage after the home is completed.
A one-time close loan generally
eliminates the need for a separate
permanent-loan closing.
Construction funds are typically
disbursed in stages as the builder
completes approved portions of
the project.
Once construction is finished and
required conditions are satisfied,
the loan continues under its
permanent mortgage terms.
For a more detailed overview, visit
our
One-Time Close Construction Loan Guide
.
What Types of One-Time Close Construction Loans Are Available?
There is no single construction
mortgage that works for everyone.
Different programs have different
down payment, credit, income,
property, and builder requirements.
FHA Construction Loans
FHA construction-to-permanent loans
may offer a lower down payment
option for eligible borrowers.
Qualifying borrowers may be eligible
for a down payment as low as
3.5%, subject to FHA
guidelines and lender requirements.
FHA mortgage insurance and
primary residence requirements apply.
VA Construction Loans
Eligible veterans, active-duty
service members, and certain
surviving spouses may qualify
for VA-backed construction financing.
VA financing may offer
no-down-payment options
for eligible borrowers, depending
on entitlement, appraisal,
loan structure, and lender guidelines.
VA loans do not require monthly
mortgage insurance, although a
funding fee may apply unless exempt.
USDA Construction Loans
USDA single-close construction
loans may offer eligible borrowers
the opportunity to build a
primary residence in a
qualifying rural area.
Potential benefits include
no-down-payment financing
for eligible borrowers.
USDA household income limits,
property eligibility, and
lender requirements apply.
Conventional Construction Loans
Conventional construction-to-permanent
mortgages may provide additional
financing flexibility for
eligible borrowers.
Down payment requirements vary
by lender, property type,
loan amount, and borrower profile.
These programs may be suitable
for borrowers building custom
homes or those who do not
qualify for government-backed
construction financing.
How Much Money Do You Need to Build a Home?
The amount of money needed depends
on your selected mortgage program,
the total construction budget,
the property’s appraised value,
and your financial qualifications.
| Loan Program | Potential Down Payment | Important Considerations |
|---|---|---|
| FHA | As low as 3.5% for eligible borrowers | FHA limits, mortgage insurance, and lender requirements |
| VA | Potentially 0% | VA eligibility, entitlement, appraisal, and lender requirements |
| USDA | Potentially 0% | Eligible location, household income, and program requirements |
| Conventional | Varies by program and lender | Credit, assets, loan amount, and property requirements |
These are potential program features,
not guaranteed financing offers.
Actual cash requirements can also
include closing costs, reserves,
and construction-related expenses.
Can You Use Land You Already Own?
Yes, depending on the construction
loan program and lender guidelines.
If you already own a building lot,
the lender may consider the value
of the land, existing land debt,
and your proposed construction costs
when determining the financing structure.
In some situations, eligible land
equity may help satisfy part of
the borrower’s required investment.
However, the treatment of land
equity differs between FHA,
VA, USDA, and conventional
mortgage programs.
Example: Building on Land You Own
Suppose you own a building lot
and want to construct a new home.
Instead of automatically assuming
you need to bring a separate
cash down payment, a construction
lender can review your land value,
existing liens, total project costs,
and the selected loan program.
Depending on the guidelines,
your land ownership may affect
the amount of additional cash
required at closing.
Do You Make Mortgage Payments During Construction?
This is one of the most common
questions borrowers ask.
The answer depends on the
specific construction loan.
Some programs may allow eligible
construction-period interest or
payment reserves to be included
in the financing structure.
Other programs require payments
during construction.
Before closing, your lender
should explain how construction
interest is calculated,
whether payments are required,
and when permanent mortgage
payments begin.
How Do You Qualify for a Construction Loan?
Qualifying for a construction
mortgage involves both
borrower approval and
construction project approval.
Lenders generally review:
- Credit history and applicable credit scores
- Documented income and employment
- Debt-to-income ratio
- Available assets and required funds
- Land ownership and existing liens
- Builder qualifications and construction contract
- Architectural plans, specifications, and project budget
- Appraisal based on the proposed completed home
The lender may also require
builder approval, construction
draw procedures, inspections,
and completion documentation.
Steps to Building Your Home With a One-Time Close Loan
-
Discuss your financing options.
Determine which construction loan
programs may fit your financial
situation and building goals. -
Establish a realistic budget.
Consider land, construction,
site work, closing costs,
and potential contingencies. -
Select a qualified builder.
The builder must meet the
requirements of your selected
loan program and lender. -
Submit construction documentation.
Provide plans, specifications,
cost estimates, and the
construction contract. -
Complete appraisal and underwriting.
The lender reviews the borrower,
builder, property, and project. -
Close your construction loan.
After approval, the loan closes
and construction can proceed
according to the lender’s requirements. -
Complete construction.
Funds are released through
the approved draw process.
After completion requirements
are satisfied, permanent
financing terms take effect.
Is a One-Time Close Construction Loan Better Than Two Loans?
For many borrowers, a one-time
close structure offers
important conveniences.
Potential advantages include:
- One closing instead of two
- Potentially fewer duplicate closing expenses
- Permanent financing arranged before construction begins
- Reduced need to seek a new mortgage after construction
- A more coordinated construction financing process
However, a two-close construction
loan may offer advantages in
certain situations, depending
on builder flexibility,
available programs, rates,
and individual circumstances.
The best option depends on
your specific project.
Frequently Asked Questions
Can I build a house with no money down?
Potentially. Eligible VA and USDA
borrowers may qualify for
no-down-payment construction
financing. Closing costs,
reserves, appraisal limitations,
and other requirements may still apply.
Can I use an FHA loan to build a new house?
Yes. FHA construction-to-permanent
financing may be available for
eligible primary residences,
subject to FHA and participating
lender requirements.
Can I buy land and build a home with one loan?
Certain construction-to-permanent
programs permit eligible land
purchase costs and home
construction costs to be
included in one transaction.
Do I need a builder before applying?
You can discuss financing options
before choosing a builder.
However, final construction
loan approval generally requires
an acceptable builder,
construction plans,
and a project budget.
Will I need another mortgage closing after construction?
A true one-time close loan
generally avoids a second
permanent-loan closing.
Construction completion and
other program-specific
requirements still apply.
Where does All Home Mortgages offer construction loans?
All Home Mortgages assists eligible
borrowers in Ohio, Kentucky,
Florida, and Michigan, subject
to available lender programs
and property eligibility.
Start Planning Your New Home With All Home Mortgages
Building a home is a major
financial decision, and
choosing the right financing
structure early can make
the process easier to navigate.
All Home Mortgages is an
independent mortgage brokerage
based in Cincinnati, Ohio.
We work with multiple
wholesale lending partners
to help eligible borrowers
explore financing options.
Whether you’re considering
FHA, VA, USDA, or conventional
construction financing,
we can review your scenario
and discuss potential options.
Seth Stefanko
Owner & President
NMLS #347217
Phone:
(513) 470-9939
Email:
seth@allhomemortgages.com
Thinking About Building a Home in 2027?
Explore your construction financing
options before committing to
a builder or purchasing land.
Start your secure mortgage
application or contact us
to discuss your plans.
All Home Mortgages, LLC | Company NMLS #1714399.
4240 Airport Road, Suite 101,
Cincinnati, OH 45226.
Serving eligible borrowers in
Ohio, Kentucky, Florida, and Michigan.
All mortgage loans are subject to
borrower qualifications, credit approval,
underwriting, property and builder
eligibility, and lender program requirements.
Loan programs and terms are subject
to change. This article is for
educational purposes and does not
constitute a commitment to lend.
