Stop 03 · Lender
A construction-to-permanent loan pays for building your home in stages, called draws, as work passes inspection. When the house is finished and has a certificate of occupancy, the same loan converts to a regular mortgage, so you close only once. Lenders review your credit, income, builder, plans, and the home’s finished value.
Answer a few questions about the property, budget, and builder. We’ll show construction-to-permanent lenders who lend in your state.
On the path · Lender
State, occupancy, and whether this is a new build or a major renovation.
State
Occupancy type
Construction type
How it works
A construction-to-permanent loan is one mortgage with two lives. During the build it funds in draws, and how interest is handled during the build varies by lender. When the house is finished, the same loan converts to a permanent mortgage without a second closing.
Plans, builder, budget, and as-completed appraisal are in. You close once.
The GC requests funds as work passes inspection. How interest is handled during the build varies by lender.
Certificate of occupancy ends the construction period.
The loan converts to a permanent mortgage. No second application if it is a true one-close.
Sizing
Enter your own numbers and a rate and debt-ratio limit from your lender. The tool converts what is left after other debts and housing expenses into a loan amount. Estimate only — not an offer of credit.
| One-time close | Two-close (construction then perm) | |
|---|---|---|
| Closings | One application, one set of fees | Construction close, then a second perm close |
| Pricing | Set at the first closing; details vary by lender | Re-qualify and re-price at the second closing |
| During the build | How interest is handled varies by lender | How interest is handled varies by lender |
| Risk | Must finish inside the construction period | Must refinance; the market and your credit can change |
| Lenders we connect you with | Flagstar, Waterstone, U.S. Bank, TD Bank | Not the product these four lenders are shown for |
Case studies
Composite examples from typical one-close loans. Not real clients, not an offer of credit — they show how lot, occupancy, and drawings drive the loan.
Owned lot · primary
Jordan & Priya · Hillsborough County, FL
The situation
They owned their lot free and clear and had a stick-built contract with a licensed custom builder. Their credit was strong, and they did not want to write a large check at closing.
How it funded
The as-completed appraisal supported a loan that covered the construction contract, and their lot equity counted toward the down payment. One closing covered the build, and the loan converted to a permanent mortgage when the house was finished.
When the land is already in your name, lenders look at the value of the finished house, not only the build cost.
Second home · coastal
Marcus · Dare County, NC
The situation
His primary residence already had a mortgage. He wanted a stick-built second home on a lot he was buying in the same loan. Occupancy: second home, not a rental.
How it funded
Land and build in one closing. Cash at closing covered his share of the land; construction was funded in draws. The lender’s second-home requirements applied (no investment use, licensed builder, no work started before closing). The loan converted to a permanent mortgage after the certificate of occupancy.
Second homes can use a one-close loan. Investment and spec homes usually cannot.
Major renovation
Elena · Mecklenburg County, NC
The situation
A 1950s ranch she owned, with a small remaining mortgage. Plans for a full down-to-the-studs renovation and a second-story addition. She needed the existing house to stay the collateral.
How it funded
Treated as a major renovation with a construction-to-permanent loan, not a cash-out refinance. As-completed appraisal on the expanded house. Her existing mortgage was paid off in the new loan. Draws followed the foundation for the addition, dry-in, and finish. Builders risk named the lender through completion, then a homeowners policy covered the finished home.
A true gut job can qualify for construction financing if the plans, builder, and as-completed value are documented like a new build.
Jumbo · custom build
The Whitakers · Fairfax County, VA
The situation
A larger custom home on land they already owned, with a licensed custom builder and a full permit set. They needed a lender offering jumbo one-close construction loans on a stick-built primary home, with no owner-builder.
How it funded
The lender qualified them on the finished home’s full housing cost, including taxes and insurance. Their down payment came from a mix of lot equity and cash. No modular, no spec. The loan converted to a permanent mortgage at completion.
Jumbo construction loans still depend on credit, occupancy, and a builder the inspector will accept. Loan size is only one part of the review.
East Coast footprint
Chris · Fairfield County, CT
The situation
Under contract on a lot and planning a first-time custom build. He needed a lender who actually lends in Connecticut, not only a national program that looks good on a map.
How it funded
We started with lenders who lend in his state. The lot purchase and construction closed together, with cash down against the full project because the land was not yet owned. Licensed builder, no work started before funding. Builders risk was bound at closing, and the first draw came after the foundation inspection.
Where a lender lends is a hard filter. A great program that does not lend in your state is not the right fit.
Guides
Lenders size the loan on the finished home’s full housing cost, including taxes, insurance, and HOA.
How interest is handled during the build varies by lender. Either way, construction lenders size you on the cost of owning the finished home, because that is the debt that remains when the loan converts.
If you budget only for the build period, you can end up planning a house whose finished housing cost does not fit your budget. Run your debt ratio on the as-completed housing expense, and ask your lender what you will owe during the build.
Taxes and insurance should be estimated on the finished dwelling, not the vacant lot. The tax bill on a completed custom home will be far higher than what you paid on raw land.
A strong LTV from land you already own can still fail if the lender caps how much of the hard cost they will fund.
LTV on a construction-to-permanent loan is typically the loan divided by as-completed value — the appraised finished house. If the lot is already on title, that land is inside the finished value, so your equity often counts as the down payment.
Loan-to-cost is the loan divided by what you are actually spending (land remaining + construction). A loan can look comfortable on LTV and still be tight on LTC. Some programs will fund the full construction contract when the lot is owned; others still want cash in against cost.
If you are buying the lot in the same loan, both tests usually get harder. Budget cash for the land down payment, closing costs, and a construction contingency the inspector can see.
A true one-time close is one application that becomes the permanent mortgage. Two-close means you re-qualify later.
One-close construction-to-permanent financing closes once. The loan funds the build in draws, then converts to a permanent mortgage when the house is finished. How interest is handled during the build varies by lender, so ask how pricing is set at that first closing.
Two-close is a short construction loan plus a separate permanent mortgage. You pay a second round of fees, you re-qualify, and the pricing depends on the market when you convert. If the market or your income changes, the house you built may not refinance.
If your plan is to live in the house, one-close is usually the cleaner path. Two-close can still make sense for a spec or a builder who will sell before conversion — products most construction-to-permanent lenders will not do anyway.
The appraiser is valuing the house in the drawings, not the dirt and a pile of lumber.
The construction lender orders an as-completed appraisal: market value as if the plans, specs, and budget were already built. That number is the denominator for LTV. Incomplete drawings produce a conservative value or a rejected order.
The set has to include a square-footage schedule the appraiser can defend — heated living, garage, porches, and any ADU called out separately. Finish specs matter. “Owner to select” is not a spec; it is an invitation to under-appraise.
If the bid, the plans, and the appraisal do not describe the same house, draws stall later when the inspector cannot find the work the appraiser assumed. Freeze the set before you order the report.
You do not get paid for invoices. You get paid for work the inspector can see.
A construction loan funds in stages. The GC requests a draw, an inspector confirms the work in place, and the lender releases that slice. How interest is handled during the build varies by lender. Front-loading labor or deposits the inspector cannot see is how projects stall early.
Retainage — a share of each draw held until punch list and CO — exists so the last items actually get finished. Owners who waive it to “keep the crew” often fund the final work out of pocket.
If the construction period is nearly over and there is no drywall, you need a modification, not hope. Extensions are underwriting events. Hire a GC whose last three jobs finished on schedule.
