Single Close Construction Loans - GO Mortgage (2024)

Building your own home can feel like a dream come true. It allows you the flexibility to create the home you want in a location of your choosing.

Moving forward with a new build is a big decision and a big commitment. With a single close construction loan, we simplify the process for you with financing designed specifically to streamline building a new home.

What is a Single Close Construction Loan?

With a single close construction loan, you can finance both the construction of your new home and the long-term mortgage that will be needed to afford your home once it’s built.

This streamlines the process, allowing you to close on your home loan once, rather than having to secure two or more separate loans for the property, construction, and home financing.

You qualify once and have a single appraisal, loan originator, and closing process. This reduces the time it takes to build and move into your new home, protects you from unforeseen circ*mstances down the road, and saves you from paying double the closing costs.

With other loan options, financing new home construction has been notoriously difficult. Buyers had to find a way to finance the land, construction project, and home. In many cases, this required getting two or three loans.

Home construction is complicated and requires many moving parts. Single close construction loans are made to help simplify the process.

Qualifying for a one-time close construction loan is no more complicated than qualifying for a conventional home loan, depending on your overall financial health and risk level.

How Single Close Construction Loans Work

If you’d like to see whether you qualify for a single close construction loan, connect with us. To get you started, we’ve outlined the steps needed and loan programs available to help you understand the process.

The Financing Process

Get in touch with us to see if we can start the process to finance the construction of your new home.

  1. Choose a builder: Find a reputable builder in your area who meets eligibility requirements for financing, including 3 years minimum experience building residential homes, a minimum of $1 million per year in volume, and that their primary business is building residential homes.
  2. Prepare a contract: We’ll work with you as you prepare a contract with your builder to determine if the home is within your budget and what the cost and timeline will be to build your home and finance it.
  3. Begin the loan process: Once you review and sign the contract, it will be evaluated by our construction underwriting team. Signing the contract and providing needed documentation usually take only a few days.
  4. Underwrite the loan: Our underwriting team will evaluate and potentially approve the loan for the construction process, as well as the permanent portion of the loan in one single step.
  5. Close the loan: With a final review of all the financial information you submitted, including documentation of current income and financial liabilities, you can sign the paperwork to close on your loan and secure financing.
  6. Begin construction: You’ll begin construction on your new home within 30 days of the closing date. Your construction team will provide you with regular updates on the progress of your home. We’ll manage the construction phase, including ordering draw inspections and any state-required surveys and inspections.

Partnership Guidelines

Review our requirements and descriptions of the lending choices available to our partners.

Single Close Construction Loan Program Options

We offer specialized loan programs to meet various borrower needs. Each loan program is government-backed, meaning we follow standard rules for fees, interest rates, and how funds are used.

Government backing allows borrowers to secure financing with low or no down payments and even low credit scores, as long as you meet standard eligibility requirements.

All of our available loan programs can be used to finance new home construction. We also work with homebuyers to finance land if you don’t already have a lot to build on.

Learn more about each of our single close construction loans available.

U.S. Department of Agriculture (USDA) Single Close Construction Loans

A USDA single close construction loan, also known as a rural development loan, is available in certain rural and suburban areas. These 30-year fixed-rate mortgage loans don’t require a down payment. Buyers can even finance their closing costs, minimizing additional expenses beyond the home’s upfront cost.

Veterans Administration (VA) Single Close Construction Loans

Available to qualified veterans, active military, and their eligible surviving spouses, a VA single close construction loan equips you to build, buy, repair, retain, or adapt a home. No down payment is required, closing costs are limited, and you aren’t charged a penalty for paying the loan in advance.

Federal Housing Administration (FHA) Single Close Construction Loans

FHA Single Close Construction loans are designed for low- and moderate-income buyers and are especially popular for those seeking to build a starter home. They require lower down payments and lower credit scores than a conventional loan package.

Fannie Mae Single Close Construction Loans

Fannie Mae is a government-sponsored company that guarantees loans, allowing lenders to extend loans to lower-income home buyers with reduced risk. The Fannie Mae Single Close Construction loan program mandates a minimum credit score of 680 for fixed-rate loans applied to single-family homes.

Single Close Construction Loan FAQs

Financing the build and long-term mortgage of your new home is an important step in beginning this process. It’s ok to have questions. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.

What type of property can I finance with a single close construction loan?

Single close construction loans apply to a wide range of property types. When you connect with us, we’ll discuss whether your property and build type will qualify.

Below are common property types we’re able to finance with single close construction loans:
Single family residences
Owner occupied
Modular
Manufactured
Site built
Stick built
Doublewide
Factory built
“Build on your lot”
Land home
Barndominiums
Post Frame

Do I need good credit to qualify for a single close construction loan?

Credit is one factor used to decide how much you can finance with a single close construction loan.

The minimum requirements vary depending on the loan program. In many cases, a credit score of 640 or higher is often best. A credit score of 700 or above is considered low risk, while a score of 800 to 850 is exceptional.

We will examine your entire financial outlook and work with you to find a loan solution that meets your needs, considering many factors including your credit score, current income, and investments.

Do I need a down payment for a single close construction loan?

Whether you need a down payment for your loan depends on the specific loan program you decide to use.

Our single close programs offer down payments anywhere from 0-3.5% to a maximum of 5%. This is a small fraction of what other lenders typically ask for with traditional construction loans, which require a down payment of around 20% to get the best loan terms.

How do single close construction loan interest rates compare to other construction loans?​​

Interest rates for single close construction loans vary based on a variety of factors including your credit score, the location where you want to build, your loan type, and loan amount.

To know what interest rate your situation would qualify for, get in touch with one of our loan advisors for more specific information.

What happens with financing after closing a single close construction loan?

Most of the lending process will be handled for you behind the scenes by our team and your builder. You’ll just want to be ready to discuss your needs with your builder and read contracts closely at each stage of the process. We’re always here to help.

With a single close construction loan, you receive both an interim construction loan and a 30-year permanent loan at the same time. You get a single promissory note and one deed of trust. You’ll sign the 30-year amortizing promissory note at closing.

Once the promissory note is signed, any liens on the land will be automatically paid off. A draw amount will be made available to the builder so construction can start right away.

When the project is complete, you’ll receive a loan modification to amend the date for first payment. After the loan modification is signed, the 30-year amortizing loan works like any other home loan with fixed interest rates.

How does my lender get involved with the construction of my new home?

We have an in-house single close construction management team. Using our years of experience and home-building expertise, our experts review and approve documentation from every stage of construction.

This includes project budget and timeline, planning and specifications, permits and inspection, and building code best practices.

At the start, you’ll want to find and engage the builder of your choice as long as they meet the quality standards for our program. Our builder vetting process ensures that all builders accepted into our program have a sterling record of on-time completion for their home projects. Quality, safety, and efficiency are our top priorities.

Our team will help keep your project on track every step of the way. This allows potential problems to be dealt with before they can turn into major delays.

Our completely hands-free building process means you never need to worry about applying for building permits or arranging inspections as your construction takes shape. It is all handled for you. The documentation you might need in the future is centralized all in one place.

Are there other names for single close construction loans?

Single close construction loans have other names as well.

As you work with builders and lenders, you might hear single close construction loans referred to as single close loans, construction-to-perm loans, one-time close loans, construction conversion loans, CTP loans, or even all-in-one loans.

Single Close Construction Loans - GO Mortgage (2024)

FAQs

Can you convert a construction loan into a mortgage? ›

A construction-to-permanent loan — also known as a one-time, single-close or construction-perm loan — is a type of mortgage for those building a new construction home. Once the home is built, the loan converts into a traditional mortgage, usually with a 15- or 30-year term.

What loan is most likely to utilize a single closing as a new construction loan? ›

Construction-to-permanent loan

The advantage of taking the construction-to-permanent route is that you only have to pay one set of closing costs, lowering your overall costs. Homeowners who want to save money on closing expenses and lock in their mortgage financing tend to go for construction-to-permanent loans.

Is it easier to get a construction loan than a mortgage? ›

Construction loans typically have tougher criteria and higher interest rates than conventional mortgages for existing homes.

What is the minimum FICO score for a construction loan? ›

Credit Score and Income Minimums

Additionally, don't make any large purchases in the months before you're going to apply for a construction loan. Most lenders typically want a minimal credit score of 680 for the loan to be considered, some want the score to be 720 or better.

What happens at the end of a construction loan? ›

At the end of the construction period, your home construction financing will convert into a permanent loan without additional closing costs. Then, you will begin paying interest and principal each month.

Can you refinance after a construction loan? ›

Once the funds from the construction loan have been used and the house has been built, this type of loan is typically converted or refinanced into a standard long-term mortgage loan.

What are the three phases of a construction loan? ›

If you are looking for financing to build your new home, you may not know where to start. It can be a headache to deal with the different stages of a tradition construction loan: the “pre-approval” or “commitment” stage, the “interim lending” stage, and the “permanent loan” stages.

What is the timeline for construction loan closing process? ›

Estimated Timelines for Construction Loans

The construction loan process typically takes between 30 to 60 days. However, timelines may vary based on several factors, including appraisal timelines and underwriting queues. Being aware of these will help you plan more effectively.

When building a house, when do you start paying the mortgage? ›

Generally, the builder deposit is 10% of the total construction costs before construction begins. Once you've paid the builder deposit, you may have to pay the full cost of custom upgrades and change orders. After construction is finished, you'll take out a mortgage to pay off the builder and buy the lot.

Why are construction loans hard to get? ›

Getting a construction loan can be more difficult than getting a traditional mortgage loan, mainly because they're riskier for lenders. Don't be surprised if you need a higher credit score, a larger down payment or detailed construction plans to get approved.

What is the debt to income ratio for a construction loan? ›

Construction loan approvals typically require less than 43% of your income to go towards your proposed house payments, combined with all other debt that you have. 20% Down Payment: You will need a 20% down payment of the loan amount, and if you pay less than that, you will probably pay private mortgage insurance (PMI).

Why are construction loan rates higher? ›

As a rule, construction projects carry a perceived higher risk. Delays or budget overruns are very common for these projects, no matter how well you plan. Consequently, construction loan interest rates are often higher than those of traditional mortgages, reflecting the lender's need to mitigate these risks.

Can I get a construction loan with a 650 credit score? ›

Construction loan requirements

Credit score required to undertake a construction project is 620 or higher. And for many, this is just the minimum, as some lenders may require a score of 720 or better.

Can you use land as a down payment for a FHA loan? ›

The Land. If you already own a plot of land on which you intend to build a home, you are a step ahead in the process. Your land equity will cover the down payment requirement (3.5% minimum for FHA loans). You might need to purchase the lot; in which case it is important to think long term.

Can I buy a house with a 560 FICO Score? ›

Key takeaways. You can get a mortgage with a credit score as low as 620, 580 or even 500, depending on the type of loan. Some mortgage lenders offer bad credit loans with more flexible qualifying requirements but higher costs. Others offer free credit counseling to help you improve your score before applying for a loan ...

Is it cheaper to buy a house or build it? ›

Overall, it's cheaper to build a home than to buy one in California, with 13 out of the 20 counties saving you money if you decide to build your house from scratch. Budget-wise, building is more favorable in Southern California whereas Central California caters best to those interested in buying.

Are construction loans subject to the right of rescission? ›

For example, if a consumer whose principal dwelling is currently A builds B, to be occupied by the consumer upon completion of construction, a construction loan to finance B and secured by A is subject to the right of rescission. A loan secured by both A and B is, likewise, rescindable.

How to finance a teardown and rebuild? ›

A construction-to-permanent loan is the most common mortgage offered to finance this type of project. These loans offer the ability to finance your construction cost, pay interest only while construction is completed and then turn into a long term mortgage, or permanent financing.

How to build a house while paying a mortgage? ›

How to finance a home build with an existing mortgage
  1. Avoid taking out a conventional mortgage on your own.
  2. Instead, obtain a construction-to-permanent loan.
  3. Go with a lender that specializes in home building.
  4. Find a the right loan for your home build.
  5. Opt for an end-to-end solution.
Nov 30, 2023

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