Stop 03 · Lender
Answer a few questions about the property, budget, and builder. We’ll show construction-to-permanent lenders who can work the file 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 you pay interest only on money already drawn. When the house is finished, the same loan converts to a permanent mortgage — usually a 30-year fixed or an ARM — without a second closing.
Plans, builder, budget, and as-completed appraisal are in. You close once.
The GC requests funds as work inspects. You pay interest only on what has funded.
Certificate of occupancy ends the construction period.
The loan rolls to principal-and-interest. No second application if it is a true one-close.
Sizing
Same math the matching lenders use on the permanent mortgage: income × DTI, minus other debts and housing expenses, converted to 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 |
| Rate | Often locked or with a published float-down at conversion | Re-qualify and re-price at the second closing |
| Payments in build | Interest only on draws | Interest only on draws |
| Risk | Must finish inside the construction term | Must refinance; rates and credit can move |
| This match set | Flagstar, Waterstone, U.S. Bank, TD Bank | Not the product these four lenders are shown for |
Case studies
Composite examples from typical one-close files. Not real clients, not an offer of credit — the numbers show how lot, occupancy, and drawings drive the loan.
Owned lot · primary
Jordan & Priya · Hillsborough County, FL
The file
They owned a $275,000 lot free and clear and had a $920,000 stick-built contract with a licensed custom GC. Credit in the 740s. They did not want to write a large check at closing.
How it funded
As-completed value came in at $1.22M. At 80% LTV the file supported about $976,000. That covered 100% of construction; lot equity was the down payment. One-close, interest-only on draws for 14 months, then 30-year fixed.
When the land is already on title, LTV is against the finished house — not only the build cost.
Second home · coastal
Marcus · Dare County, NC
The file
Primary residence already mortgaged. He wanted a $1.1M stick-built second home on a lot he was buying in the same loan. Credit 760. Occupancy: second home, not a rental.
How it funded
Land + build in one one-close file. Cash in at closing covered the land down payment; construction funded on draws. Second-home overlays applied (no investment, licensed GC, no pre-start). Converted to a 7-year ARM after CO so he could float if he sold the primary later.
Second homes can one-close. Investment/spec usually cannot on this product set.
Major renovation
Elena · Mecklenburg County, NC
The file
1950s ranch, owned with a small remaining first mortgage. Plans for a full down-to-the-studs renovation and second-story addition, $640,000 hard cost. She needed the existing house to stay the collateral.
How it funded
Treated as major renovation / construction-to-perm, not a cash-out refi. As-completed appraisal on the expanded house. Existing mortgage paid off in the new loan. Draws followed foundation (addition), dry-in, and finish. Builders risk named the lender through CO, then a homeowners policy on the finished dwelling.
A true gut job can use the construction desk — if the plans, GC, and as-completed value are in the file like a new build.
Jumbo · 720+ credit
The Whitakers · Fairfax County, VA
The file
Owned lot, licensed custom GC, permit set, 780 credit. Hard cost $2.15M. They needed a desk that would do jumbo one-close on a primary, stick-built, no owner-builder.
How it funded
Qualified on the permanent P&I plus taxes and insurance — not the interest-only draw. 20%+ down equivalent from lot equity and cash. 18-month construction term. No modular, no spec. Converted to 30-year fixed at CO with a float-down that had been written into the one-close.
Jumbo construction still hangs on credit, occupancy, and a GC the inspector will accept. Size is not the only overlay.
East Coast footprint
Chris · Fairfield County, CT
The file
Contract on a $410,000 lot, $780,000 to build, first-time custom. Credit 700. Needed a lender who actually lends in Connecticut, not only a national overlay that looks good on a map.
How it funded
State-by-state match first. Lot purchase and construction in one close with cash down against the full project (land was not yet owned). Licensed GC, no work started before funding. Builders risk bound at closing; first draw after the foundation inspection.
Footprint is a hard filter. A great program that does not lend in your state is not a match.
Guides
The payment that sets your max loan is the permanent mortgage — P&I plus taxes, insurance, and HOA.
During construction you only pay interest on money already drawn. That number is almost always lower than the payment you will make after the certificate of occupancy. Construction lenders still size you on the higher figure, because that is the debt that remains when the loan converts.
If you budget only for the draw payment, you can get approved for a house whose permanent payment does not fit the file. Run debt ratio on the as-completed housing expense, then treat interest-only as cash-flow relief during the build — not as the qualification test.
Taxes and insurance should be estimated on the finished dwelling, not the vacant lot. A $8,000 tax bill on a completed custom home will not look like the $1,200 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 file can show 80% LTV and 95% LTC at the same time. Some programs will fund 100% of construction 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. You pay interest on draws, then the same loan rolls to principal and interest when the house is finished. Rate is often locked, or written with a published float-down, 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 rate is whatever the market is on the day you convert. If rates jump or 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-perm desks will not do anyway.
The appraiser is valuing the house in the drawings, not the dirt and a pile of lumber.
The construction desk 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. Interest accrues only on what has funded. Front-loading labor or deposits the inspector cannot see is how files blow up in month two.
Retainage — often 5–10% 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 last month out of pocket.
If the construction term is 12 months and you are at month 11 with no drywall, you need a modification, not hope. Extensions are underwriting events. Hire a GC whose last three jobs finished inside the term you are about to sign.