Loans Build or renovate Single-close construction
Single-close construction: build with one loan
A single-close construction loan pays for the land and the build, then becomes your permanent mortgage when the home is finished. You qualify once and close once, and the loan documents set the permanent terms at that closing.
New to this loan? Start here: Contractors, bids and draws A 3-minute lesson
Who it fits
Buyers who own land or have found a lot, with a builder and plans in hand, who want one approval and one closing instead of a construction loan followed by a second mortgage closing. Because the permanent terms are set at the start, there is no second approval when the home is done.
How it works
- Plans, budget and builder. The lender reviews the builder, the plans and the cost breakdown, and you qualify for the finished loan.
- Appraisal on the plans. The appraiser values the home as it will be when finished.
- One closing. The loan buys the lot or pays off what you owe on it, and the construction money goes into an account for draws.
- Draws as work is done. The builder is paid in stages after inspections confirm each stage.
- Final inspection. A completion report and certificate of occupancy finish the build.
- The permanent loan begins. The loan converts to its permanent terms, and regular payments start.
In Southwest Colorado, building seasons are short at our elevations. Foundations, framing and exterior work run mostly from spring to fall, so a schedule that starts late can carry into winter. Rural lots need a tested well and an approved septic system before the final inspection, along with year-round access and utilities.
We ask each lender early how it handles exterior work that weather delays at the end of a build. When you buy a finished new home from a builder, an escrow holdback can let you close on time.
By loan type
VA
- Down payment
- None
- Builder
- A VA-registered builder
- Worth knowing
- The VA funding fee applies unless you are exempt.
USDA
- Down payment
- None
- Builder
- 2 years of experience, a license where required and $500,000 of liability insurance. No owner-builders.
- Worth knowing
- Eligible rural area and income. A contingency of up to 10%, and payments while you build can come from a reserve of up to 12 months.
Conventional
- Down payment
- Purchase rules, figured on the lower of the total cost or the finished value
- Builder
- Approved by the lender
- Worth knowing
- Up to 12 months per construction period and 18 in all. Land you own counts at its value.
FHA
- Down payment
- 3.5% with a 580 or higher credit score
- Builder
- Approved by the lender
- Worth knowing
- FHA mortgage insurance applies: 1.75% upfront plus an annual premium.
Calculators and guides
Common questions
Can I be my own general contractor?
Not with USDA, and VA requires a VA-registered builder. Conventional and FHA lenders set their own rules on owner-builders, so ask before you plan on it.
What if the build costs more than planned?
A contingency reserve covers some overruns; USDA allows up to 10% of the construction cost. On a conventional loan, the amount can rise at conversion only to cover documented cost increases. Anything beyond that is paid from your own funds.
What if construction runs long?
Conventional single-close loans allow up to 12 months per construction period and 18 months in all, with no exceptions. Other programs follow the lender’s construction period and extension rules. Plan the schedule with weather in mind.
Can I build a manufactured or modular home?
Often, yes. New manufactured and modular homes on a permanent foundation can qualify under each program’s property rules.