If you’re in the market to build your dream home rather than buy one that’s already constructed, you may have come across the term “construction to permanent home loan” or “one-time close loan”. This unique mortgage product has been designed to streamline the financing process for new home construction. Let’s delve deep into what these loans are, how they work, and the benefits they bring.

What is a Construction to Permanent Home Loan?

A construction to permanent (C2P) home loan is a two-in-one loan that combines a construction loan and a permanent mortgage into a single product. Instead of securing two different loans and paying two sets of closing costs, the borrower gets one loan with one set of closing costs.

How Does it Work?

  1. The Construction Phase: The initial part of the loan is the construction phase. During this period, the lender disburses payments to the builder as the construction progresses. The borrower typically pays only interest on the disbursed amount during this phase. This interest-only period lasts until construction is complete.
  2. The Permanent Phase: Once the home is completed, the loan transitions into the permanent phase, which functions just like a standard mortgage. The borrower will start making regular principal and interest payments. At this point, the rate can be fixed or variable, depending on the terms of the loan.

Benefits of Construction to Permanent Home Loans:

  1. Simplicity: One of the most significant benefits is the convenience of having only one loan application and one closing. This means fewer fees, less paperwork, and less hassle.
  2. Locked-in Rates: With some C2P loans, you can lock in your mortgage rate at the time of application. This protects you against potential rate hikes during the construction process.
  3. Interest-only Payments During Construction: This can be beneficial for borrowers who are also carrying the costs of their current residence.
  4. Flexibility: Many lenders allow for changes to the original floor plan, materials, or upgrades, providing flexibility in the construction process.
  5. Protects Against Balloon Payments: Unlike standalone construction loans that might require a balloon payment or refinancing once construction is complete, the C2P loans automatically roll into permanent financing.

Considerations Before Opting for a C2P Loan:

  1. Down Payments: These loans often require a significant down payment, sometimes up to 20%. Lenders see construction projects as risky, and the down payment helps mitigate this risk.
  2. Strong Credit Requirement: Because of the inherent risks involved with home construction, lenders often require borrowers to have a higher credit score compared to traditional mortgages.
  3. Interest Rates: Though you might get the convenience of a single loan, the interest rates can sometimes be slightly higher than those of traditional home loans.
  4. Builder Restrictions: Some lenders may have a list of approved builders or may need your builder to be vetted, which can limit your choices.


A construction to permanent home loan offers a streamlined financing option for those looking to build a home from the ground up. It combines the funding needed for construction and the mortgage necessary for post-construction financing into one package. As with any financial decision, it’s essential to do your research, understand all aspects of the loan, and consult with a mortgage specialist to ensure it’s the right fit for your financial situation. Building a home is a significant undertaking, but with the right financing, it can be a smooth and rewarding journey.

Find out if you qualify for a construction to permanent by calling 888-416-0920 or click the apply now button.

About Brian Birk