Single-close construction loans
Construction loans that close once, before the first shovel.
Building instead of buying introduces one genuine financing risk, and it is not the interest rate. It is the second closing. A two-close construction structure re-underwrites you at the end of the build — new credit pull, new income verification, current rates — which means a job change, a medical bill or a rate move during nine months of construction can leave you with a finished house you can no longer finance.
A single-close construction loan removes that risk by closing once, up front. The land, the construction facility and the permanent mortgage are all underwritten and closed before ground breaks. You pay interest only on what has actually been drawn while the house goes up, and at the Certificate of Occupancy the loan converts to permanent financing on the terms agreed at that first closing. No second application, no second underwrite, no second set of closing costs.
Updated
Construction at a glance
- Closings
- One
- Payments during the build
- Interest only on funds drawn
- Conversion
- Automatic at Certificate of Occupancy
- Eligible builds
- Site-built, modular, eligible manufactured
- Lot equity
- Verified equity can count toward funds
- Draws
- 5 to 12+, set by construction cost
Right for you if
- Buyers building on a lot they own or are buying at closing
- Anyone who wants their rate and approval settled before construction starts
- Modular and manufactured builds on permanent foundations
- Builders who lose sales to cancellations at a second closing
- Buyers in Lincoln, Cleveland, Gaston, Iredell and upstate South Carolina, where new builds on acreage are routine
Know before you commit
- The builder gets approved too — licensing, insurance, experience and capacity
- Plans, specifications and a line-item budget are underwritten alongside you
- Change orders need approval before the work happens, not after
- Draw counts follow the approved schedule; more draws mean more inspections
- Availability and rate protection options vary by product and state
Single-close versus two-close, and why it matters
| Single-close | Two-close | |
|---|---|---|
| Closings | One, before construction | Two — construction, then permanent |
| Requalification at completion | None | Full re-underwrite |
| Rate risk during the build | Set at the first closing | Market rate at the second closing |
| Closing costs | One set | Two sets |
| Payments during construction | Interest only on draws | Interest only on draws |
The difference is entirely about where the risk sits. Two-close structures put it on the borrower at the end of the build, which is the worst possible time to discover a problem.
What gets underwritten
Three things at once: you, the builder and the house on paper. Your side is the normal credit, income and asset review. The builder is reviewed for licensing, general liability insurance, workers compensation where applicable, trade references and recent project history. The house is reviewed as a plan set, a written specification and a line-item budget, with an appraisal supporting the finished value.
Builder approval is not the bottleneck people expect, provided the packet arrives in one piece. It becomes a bottleneck when documents trickle in over three weeks. Send it as a bundle and we will normally have an answer inside the week, along with the scopes and limits we can green-light quickly.
How draws work
- The draw schedule is set at underwriting and tied to verified milestones
- A third-party inspection validates progress before funds release
- Title is updated and lien waivers collected at each draw
- Change orders are reviewed and approved before funding
- Retainage may be held until final completion
Draw counts follow the construction cost — roughly five under $250,000, eight up to $500,000, ten up to $750,000, twelve up to $1,000,000, and a project-specific schedule above that. If your build needs a different rhythm, put the proposed schedule in the construction contract and we will review it rather than discovering the mismatch at the third draw.
Modular and manufactured builds
Both are financeable, and both need documentation a site-built home does not. A modular home is built to the residential building code in sections and assembled on a permanent foundation; draws align to factory progress, set and finish. A manufactured home is built to the HUD code and needs its certification labels and data plate, installation documents, an engineer foundation certification and an appraisal with comparable manufactured homes.
This is routine west of Charlotte. It is also where financing goes wrong most often, because the paperwork is more specific and the appraisal needs the right comparables. Ask before the contract, not after the appraisal.
What builders get out of it
- A shorter sales cycle and fewer cancellations at a second close
- Predictable draws and title updates that keep subcontractors moving
- A defined change-order process and clear contingency handling
- Approved scopes and limits in writing, up front
- One point of contact rather than a queue
Product availability can vary by state and scenario. Draw counts, retainage and rate protection options depend on the product selected. All loans are subject to credit approval and collateral review.
How the draws work
Money released as the house actually gets built
Expect the standard milestones — site prep, foundation, dry-in, mechanicals, finishes and final. Factory-built projects add set and finish milestones.
| Construction cost | Draws |
|---|---|
| $1 – $250,000 | 5 |
| $250,001 – $500,000 | 8 |
| $500,001 – $750,000 | 10 |
| $750,001 – $1,000,000 | 12 |
| Above $1,000,000 | Varies by project |
Draw count follows the approved schedule and scope. Fewer, well-timed draws mean less paperwork and less waiting. If a contractor needs a schedule beyond the allocated count, it should be noted in the construction contract with the proposed schedule attached.
What we manage for you
- Draw schedule set at underwriting and tied to verified milestones
- Title updates and lien waivers required with each draw
- Inspections ordered by the construction team to validate progress
- Change orders reviewed and approved before funding
- Retainage may apply until final completion
For builders
Why builders work with us
Builder approval is not the bottleneck people expect it to be, as long as the packet arrives in one piece. Send us these and we will tell you where you stand — plus the scopes and limits we can approve quickly.
Get builder-approved- Faster sales cycle and fewer cancellations at a second close
- Predictable draws and title updates that keep subs moving
- A clear change-order process and defined contingency handling
- A dedicated construction team that answers the phone
- Approved scopes and limits up front, so you know what we can green-light quickly
In their words
Clients who used construction
#1 Choie for any Mortgage first time buy, refi, and Cash out Refi. Great customer service, responds to every call and text, knowledgeable and experienced, Excellent at communication before performing task to his clients. Answers any questions in a perfessional manner.
Travis and his team are just absolutely wonderful. We just closed on our new house and he was with us every step of the way. This is the 4th time we have used him as our lender over the years and he never disappoints. He is consistent with his knowledge but does it in a way that you feel like you are old friends with him. I tell everyone I know looking to buy a home to call him. I honestly know they will get the same amazing care my husband and I receive by working with him. Can’t say enough good things about him…. If you are looking to buy I highly suggest you reach out to him and his team!
Questions
Construction, answered
Not with a single-close loan — that is the entire point. The loan is underwritten and closed once, and the Certificate of Occupancy converts it to permanent financing on the terms already agreed. Two-close structures do requalify you at the end, which is where they go wrong.
Interest only, on the balance actually drawn to date rather than the full loan amount. The payment grows as the house does instead of landing all at once.
Yes. Verified lot equity can count toward required funds when it meets valuation and title requirements. Bring the deed and the closing statement from when you bought it and I will tell you what it is worth to the file.
It scales with construction cost: about five under $250,000, eight to $500,000, ten to $750,000, twelve to $1,000,000, and a project-specific schedule above that. A different schedule can be reviewed if it is written into the construction contract.
Submit them before the work starts. If contingency funds are available a change order can often be approved against that contingency, with the budget and schedule updated to match. Change orders submitted after the work is done are the expensive kind.
Usually, and quickly, if the packet is complete: W-9 and business information, contractor license where required, general liability insurance, workers compensation if applicable, trade references and a recent project list. Send it as one bundle.
More in the full mortgage FAQ, or ask me directly.
This is not an offer to enter into an agreement or a commitment to lend. Not all applicants will qualify. Information and rates are subject to change without notice. All loans are subject to credit review and approval. Program guidelines, fees and loan limits are set by the applicable agency or investor and are subject to change. Fairway Home Mortgage is a division of Fairway Independent Mortgage Corporation. NMLS Entity ID #2289.
Next step
Find out what you qualify for before you shop.
A documented pre-approval takes about 24 hours once your paperwork is in, costs nothing, and tells you whether construction is genuinely your best route.