One-Time Close Construction Loan: One Closing, Big Relief

One-Time Close Construction Loan Explained

A one-time close construction loan (also called a construction-to-permanent loan) lets you buy land, pay for construction, and roll everything into one long-term mortgage with a single closing. Instead of getting a short-term construction loan and then refinancing later, you close once up front and the loan transitions to the permanent mortgage after the home is finished—helping you save time, reduce duplicate closing fees, and simplify the process.

Updated February 6, 2026: Program rules can vary by loan type (FHA/VA/USDA/Conventional), lender overlays, builder approval requirements, property type, and state guidelines. Use this guide as a starting point, then confirm specifics with your loan officer and builder before signing a construction contract.

What You’ll Learn in This Guide

In the next few minutes, you’ll understand:

• How a one-time close construction loan works from lot purchase to final mortgage
• Who qualifies (credit, income, reserves, and common lender overlays)
• Which loan programs may allow one-time close financing (FHA, VA, USDA, Conventional—availability varies)
• Down payment options and how land equity can sometimes be used
• How builder approval works and what contractors must provide
• How construction drawings and inspections work (and what “contingency reserves” mean)
• The biggest mistakes that delay approvals—and how to avoid them

Who This Loan Is Best For

A one-time close construction loan is usually a strong fit if you:

• Want to build a primary residence instead of buying an existing home
• Have a licensed builder ready (or you’re actively selecting one)
• Prefer one closing and a more straightforward path to permanent financing
• Want to include land + construction in one mortgage (or refinance land you already own)

When It Might Not Be the Best Fit

This program may not work well if:

• You want to be an owner-builder (most lenders don’t allow it)
• The property is a condo, single-wide manufactured home, or a niche build (often restricted)
• You don’t have plans/specs/budget finalized enough for the lender and builder package

What Is a One-Time Close Construction Loan?

A one-time close construction loan is a specialized mortgage that allows you to finance the cost of land, the construction of a home, and the permanent mortgage in one single loan. Unlike traditional construction loans, which require two separate closings—one for the construction phase and another for the permanent mortgage—this program simplifies the process by rolling everything into one.

Key Features of a One-Time Close Construction Loan:

• One application and one closing.
• Combines construction costs and permanent financing.
• It saves money on closing costs and eliminates the need to requalify.
• Often interest-only during construction; some programs allow payments to be deferred/financed depending on structure and qualifications.

This program is a game-changer for many homebuyers, making it easier to build a home without the hassle of multiple loans and approvals.

One-Time Close Construction Loan: Build Your Dream Home – Benefits of a One-Time Close Construction Loan

Why choose a one-time close construction loan over other loan options? Here are some compelling reasons:

1. Saves Time and Money: With one application and one closing, you reduce paperwork and administrative fees. Traditional construction loans often involve two closings, which means double the costs for title insurance, appraisals, and more. A one-time close eliminates this extra expense.
2. Simplifies the Loan Process: Because the financing is combined, you don’t have to worry about requalifying for a second loan once construction is complete. This removes a significant stress point for many borrowers.
3. No Payments During Construction: During the construction phase, you won’t need to make monthly payments. This is a huge relief for many borrowers juggling rent or other living expenses while their home is being built.
4. Flexibility With Land: This loan can be used to purchase land, or if you already own land, the equity can be applied toward your down payment. This makes the program versatile for a wide range of borrowers.

How a One-Time Close Construction Loan Makes Life Easy

Here’s a step-by-step look at how the process works:

One-Time Close Construction Loan Explained Step by Step-Application and Pre-Approval:

• The first step is to get pre-approved.
• This ensures you meet the program’s minimum credit score and income requirements.

Build on Land You Love with a One-Time Close Loan – Choosing a Builder:

• • It would be best if you worked with a licensed and approved builder.
  • The builder will act as the general contractor, managing all aspects of the construction process.

One-Time Close Construction Loan: No Double Closings

• Once your application is approved and your builder is verified, you’ll close on the loan.
• At this point, the funds for construction are made available, and the land is purchased if applicable.

Save Time and Money with a One-Time Close Loan – Construction Phase

• The builder begins construction, and funds are disbursed in stages (known as “draws”) or withheld until the home is complete, depending on the agreement.

Final Inspection and Conversion:

• Once the construction wraps up, a thorough final inspection is carried out to confirm that your new home is ready for you to move in.
• The loan smoothly converts into a permanent mortgage at this stage, making the process even easier for you.

Eligible Property Types for One-Time Construction Loans

Not all homes qualify for this program. Typical eligible property types include:

• Stick-built homes (traditional site-built houses).
• Modular homes (prefabricated homes assembled on-site).
• Manufactured homes (double-wide only).

Your Guide to the One-Time Close Construction Loan – Ineligible Properties:

• Single-wide manufactured homes.
• Condominiums.
• Niche homes, such as log cabins, bamboo homes, or storage container homes.
• Multi-unit properties or multiple homes on a single lot.

For most borrowers, the program focuses on primary residences only, so investment properties and vacation homes are not eligible.

What Is the Down Payment for a One-Time Close Construction Loan?

Down payment requirements for a one-time close construction loan (construction-to-permanent loan) depend on the loan program and the lender’s construction overlays. While standard purchase loans may allow lower minimums, construction-perm loans often add extra rules for reserves, contingency funds, builder approval, and documentation—so the “typical” down payment can look different than a regular purchase.

Updated February 6, 2026: The ranges below are typical starting points. Final requirements vary by lender, state, property type, and builder.

Simple Comparison Section

FHA One-Time Close Construction Loan Down Payment

Many FHA borrowers start around 3.5% down (if otherwise eligible), but some one-time close lenders may require more depending on credit score, reserves, and the build profile.

VA One-Time Close Construction Loan Down Payment

Eligible VA borrowers may be able to build with 0% down. However, construction overlays can still apply—especially related to builder approval, contingency reserves, and documentation.

USDA One-Time Close Construction Loan Down Payment

USDA loans are known for 0% down in eligible rural areas. Still, one-time close construction loans often require stronger documentation. They may come with overlays that affect approval or require additional reserves.

Conventional One-Time Close Construction Loan Down Payment

Conventional one-time close construction loans often require 5% down, and some lenders may require higher down payments based on credit, reserves, property type, and the complexity of the build.

Why the “Standard” Down Payment Isn’t Always the Final Number

Even when a program advertises a low minimum down payment, one-time close construction loans may also require:

• Contingency reserves (often a percentage of the build budget)
• Cash reserves (months of payments saved after closing)
• Stricter credit or DTI thresholds
• Builder approval and stronger documentation (plans/specs, bids, timeline)

Bottom line: The program’s minimum down payment is the starting point—construction overlays determine the final requirement.

What Is the Minimum Credit Score for a Construction-to-Permanent Loan?

Credit score requirements for a one-time close construction loan are usually more conservative than standard purchase loans because the lender is financing both the build and the long-term mortgage.

In many one-time close scenarios, a 620+ score is a common baseline, but the real requirement can vary based on:

• the loan program (FHA, VA, USDA, Conventional)
• lender overlays (extra rules beyond agency guidelines)
• reserves, debt-to-income ratio, and down payment
• property type and state guidelines
• the builder’s experience and documentation

Important Program Notes (so you’re not misled):

• FHA: The agency allows lower minimum scores in some situations, but many one-time close lenders set higher minimums for construction-to-permanent loans.
• VA: The VA doesn’t publish a single universal minimum score, but most lenders do—and construction loans commonly require stronger credit.
• USDA: USDA guidelines can be flexible, but many lenders still require 620+ (and some higher) for construction-perm approval.

Bottom line: If you’re around 620 or higher, you’ll generally have more options for one-time close construction financing. If your score is below that, you may still have a path—depending on the program, compensating factors, and lender overlays.

One-Time Close Loan: From Lot Purchase to New Home – What About the Land?

• You can purchase the land as part of the loan.
• If you already own the land, its equity can be used toward your down payment.
• Land gifted to you or inherited can also be used, reducing your out-of-pocket costs.

What Is the Administration Fee on a One-Time Close Construction Loan?

When lenders (or builders) mention an “administration fee” on a one-time close construction loan, they’re usually referring to a bundle of construction-related lender and third-party costs required to manage the build—things like underwriting, draw/inspection administration, and construction-phase documentation.

How Much Is the Administration Fee (Typical Range)?

There isn’t a single universal number, because it depends on your lender, your state, and how the build is administered. But in many construction loan quotes, the lender’s origination/underwriting fees are typically around 0.5% to 1.5% of the loan amount. Total construction-loan closing costs can run higher than a standard purchase, sometimes landing in a broader ~2% to 5% range once you include construction-specific items (draw inspections, title updates, etc.).

Who Pays It?

Ultimately, the borrower pays for these costs as part of the transaction—even if you see them described as “included in the builder’s contract.” If a fee is “built into” the contract, it’s typically priced into the total project cost, not free.

Is the Administration Fee Financed or Paid Out of Pocket?

Often, many allowable costs are paid at closing and/or financed into the loan, depending on program rules, lender policy, and the loan’s structure. The most accurate way to verify is to check your Loan Estimate / Closing Disclosure, where each fee must be itemized.

Is It Refundable?

In many cases, lender/origination and processing fees are nonrefundable once work begins. In contrast, third-party fees (such as certain inspections) may be refundable depending on whether the service was completed. Your lender should spell this out in writing before you pay anything.

What’s Usually Included in Construction-Related Fees?

Depending on your lender, you may see line items such as:

• Origination/underwriting/processing fees (lender fees)
• Draw inspection fees (third-party inspector verifies progress per draw)
• Title updates during construction (varies by state and title company)
• Document prep/escrow/recording and other standard closing items

Seller Concessions

Seller concessions can be used to cover closing costs. For example:

• FHA loans offer the advantage of allowing seller concessions of up to 6%. This means you can receive financial help from the seller, making your home purchase even more feasible.
• VA and USDA loans also allow seller contributions, though the limits vary.

If your builder offers concessions, they can significantly reduce your closing costs.

How Draws Work During Construction

Your builder can choose between two options:

Periodic Draws:

• • As your construction progresses, the funds will be released in stages based on the milestones achieved. This approach ensures you receive the necessary support as you make each step forward in your project.
  • Requires periodic inspections and additional administrative oversight.

No Draws:

• All funds are disbursed after construction is complete.
• Streamlines the process and often results in lower administrative fees.

Why Choose Gustan Cho Associates for Your One-Time Close Construction Loan?

At Gustan Cho Associates, we specialize in helping borrowers navigate the complexities of construction loans. Here’s what sets us apart:

• Expertise in FHA, VA, and USDA programs.
• Competitive interest rates and flexible terms.
• You’ll have a dedicated team by your side to assist you at every stage of the journey.
• Fast pre-approvals and streamlined builder verification.

Why Choose a One-Time Close Construction Loan Today

A one-time close construction loan offers a convenient and cost-effective way to build your dream home. Combining construction financing and a permanent mortgage into one loan saves time, reduces costs, and avoids unnecessary stress.

At Gustan Cho Associates, we’re here to make the process as smooth as possible.

Ready to take the first step? Contact us today to learn more about how you can qualify for a one-time close construction loan and start building your future.

One-Time Close Construction Loan: Build Your Dream Home with Ease

Discover how a One-Time Close construction loan lets you buy land, hire a builder, and move into your new home with just one simple closing.

How Does a One-Time Close Construction Loan Work?

A one-time-close construction loan is a single mortgage that includes purchasing the land, covering the construction, and providing permanent financing. Instead of having two closing days—one when you start building and another when the home is finished—everything wraps up in a single meeting. This makes the process faster, lowers closing costs, and reduces the hassle.

This loan is a good fit if you want to:

• Buy the land you want.
• Choose the builder you trust.
• Pay for the entire construction of a new house.
• Keep everything bundled into one loan.

One-Time Close Construction Loan Program Mortgage Process

In the traditional route, you get a short-term loan to pay for construction, then refinance that into a permanent mortgage when the building is done. This calls for two closing days, extra fees, and twice the paperwork.

A One-Time Close construction loan skips that hassle. At move-in, you sign the papers once, your builder starts work, and the loan automatically converts to a permanent mortgage when the house is complete. Your interest rate, loan term, and payment stay the same, making budgeting easier.

The One-Time Close Construction Loan Makes Financing a New Home Easier.

• Single Closing – You sign all papers once, before construction starts.
• Step-by-Step Funding: The lender pays for each build stage, releasing money as each part is completed.
• Easy Switch – When the house is finished, the loan automatically becomes a long-term mortgage.
• One closing saves time, cuts extra fees, and comforts the buyer and the builder.

Features to Know About the One-Time Close Construction Loan

No Upfront Costs for Builders

Builders never have to cover the money for construction out of pocket. The loan sends cash for each stage, meaning they can concentrate on the work instead of finding a buyer first.

Only Approved Contractors

To keep requests low-risk, contractors get lender approval. Builders show credentials, past work, and references. This way, only skilled teams can work on your new home.

Flexible Down Payments

• Conventional loans ask for just 5% of the home’s price as a down payment.
• VA loans offer a special break, letting eligible veterans buy with no money down.
• That helps first-time buyers and veterans move toward home ownership, often with lower upfront costs.

Contingency Reserve

When you take out this loan, you must set aside a contingency reserve of 5% of the purchase price. This reserve handles any surprise expenses that pop up during construction. It gives the lender and the buyer extra protection, so everyone sleeps a little easier.

Loan Purpose: Purchase or Refinance  

One-Time Close for Purchase  

If you’re starting from scratch and don’t own land yet, this loan covers:

• Buying the Lot.
• All construction costs.
• Closing costs and fees, excluding the required down payment.

One-Time Close Construction Loan for Refinance  

Already have a lot? Then this loan can:

• Pay off any existing loans on the land.
• Finance the construction.
• When the building is finished, combine the land loan, construction loan, and final mortgage into one payment.

Benefits of a One-Time Close Construction Loan  

• Convenience: Only one application and one closing process.
• Cost Savings: You don’t pay closing costs twice.
• Peace of Mind: The construction loan turns into a mortgage automatically.
• Flexible Options: Useful for buying and refinancing land you own.
• Veteran Advantage: VA loans may offer 0% down for qualified buyers.

Is the One-Time Close Construction Loan Right for You?  

This loan is best for anyone who wants to design and build a custom home instead of settling for something already on the market.

• Want to save time and headaches with **only one closing.
• They are using VA benefits and want to stretch savings as far as they go.
• Own the lot already and need a no-fuss way to fund the build.

One-Time Close Construction Loan FAQs

What is a One-Time Close Construction Loan?

A one-time close construction loan, also called a construction-to-permanent loan, combines everything you need into one loan. This includes the land (if you need it), the construction costs, and the mortgage. You only have to close once, instead of going through the hassle of closing twice (first for the construction loan and then refinancing). You only close once, and when your home is done, the loan automatically switches to a long-term mortgage.

How Does a Construction-to-Permanent Loan Work?

After you’re approved, the lender funds construction using a draw process tied to project milestones and inspections, based on the plans/budget and the “as-completed” appraisal. When construction is finished and final inspections are complete, the financing transitions into the permanent mortgage terms outlined at closing (structure varies by lender).

What Credit Score Do You Need for a One-Time Close Construction Loan?

Credit score requirements vary widely by lender and loan type, but construction loans are often underwritten more conservatively than standard purchases. Many lenders look for higher scores (often around the high-600s for conventional construction lending). However, some may consider it lower, depending on the program, overall file strength, and overlays.

What is the Down Payment for a One-Time Close Construction Loan?

It depends on the program and lender overlays. Conventional construction-to-permanent loans are commonly quoted with larger down payments (often around ~20%), while other lender programs may allow lower down payments depending on qualification and structure. Always confirm the down payment requirement for your exact loan type and property/build profile.

Can You Buy Land and Build a House with a One-Time Close Loan?

Yes—many one-time close programs can finance the lot purchase and construction in a single loan. Some programs also allow you to use land you already own (or recently acquired), depending on program rules and documentation requirements.

Do You Make Mortgage Payments During Construction With a One-Time close Construction Loan?

Often, construction financing uses interest-only payments during the build, based on funds drawn—though exact payment structure varies by lender and whether construction interest is financed/escrowed. Don’t assume “no payments” without seeing it in writing on your loan estimate/terms.

This blog about “One-Time Close Construction Loan: One Closing, Big Relief” was updated on February 6th, 2026.

Ready to Build Your Home? One-Time Close Construction Loans Offer Simplicity and Savings!

Gustan Cho Associates is your go-to for One-Time Close Construction Loans nationwide. From first-timers to veterans, we help you build with no hidden rules and speedy closings. Call 800-900-8569 or text us for a faster response. You can also email us at gcho@gustancho.com to kick off your dream home today.