Construction

One-time close vs two-loan construction — why this is better

Traditional construction financing comes in two pieces: a short-term construction loan (usually 12 months, interest-only, balloon at the end), followed by a separate permanent mortgage you have to qualify for AGAIN once construction completes. That's two underwriting cycles, two appraisals, two rate locks, two closings, and two sets of closing costs. If your credit or income changes during the build, your permanent loan can fall through and you're scrambling.

One-time close (OTC) collapses all of that into a single loan. We underwrite once at the start to both the construction period and the permanent payment. You close once, lock once, pay closing costs once. When construction completes, the loan automatically converts to your permanent mortgage — no requalifying, no rate uncertainty, no second closing.

What you save with OTC: roughly one full set of closing costs ($4–10K typical), one rate-lock fee, the risk of rate moves during the build, and the risk that your file weakens between construction and permanent. The OTC structure is materially better — the only reason it isn't the default is that fewer lenders are set up to handle it properly.

Four ways to build with us

We offer one-time close construction across four loan types, so the right fit depends on who you are and how much you want to put down. Two of them are products almost no other lender offers.

• VA One-Time Close — $0 down. Our signature. For Veterans, service members, and eligible surviving spouses: build with $0 down on full entitlement, no monthly mortgage insurance, and no payments during construction. Very few lenders do VA construction; it's the heart of what we do. → See the VA Construction page.
• FHA One-Time Close — from 3.5% down (DPA optional). Build with FHA's flexible credit and as little as 3.5% down. And rare among lenders: we can pair it with down payment assistance that covers your 3.5%, so building with little to no money out of pocket is on the table. → See the FHA Construction page.
• Conventional One-Time Close — as low as 5% down. For stronger-credit borrowers: build with as little as 5% down, competitive terms, higher loan amounts, and the option to drop mortgage insurance as you build equity. A great fit when FHA or VA isn't the path.
• USDA One-Time Close — $0 down, rural. For eligible buyers building in USDA-designated rural areas: $0 down, income limits apply. If your lot qualifies, this is one of the few other true no-down-payment ways to build. Check the property and income eligibility with us.

Not sure which fits? That's the conversation — tell us your situation and we'll point you to the right one (and tell you straight if another lender or loan is the better move).

The 12 steps from idea to keys

Building a home is a multi-quarter project with a lot of moving parts. Most of it is manageable if you follow a predictable sequence. We push the first three steps hard because the order matters more than most borrowers realize:

The critical three — do these in this exact order

• 1) Get pre-approved (BEFORE you do anything else). Without a real pre-approval, you're designing a home in a vacuum. Eyes-bigger-than-appetite is the #1 reason builds stall. A real pre-approval — credit pulled, income verified, AUS-approved — tells you what loan amount actually works for your scenario, on which programs.
• 2) Find your builder (BEFORE land). Your builder has more impact on the experience than we do. Pick someone you trust, with the track record and capacity for your scope. Get referrals from previous clients. Visit a completed build. Ask the awkward questions — what's their default markup, how do they handle change orders, what's their warranty. Don't shop on price.
• 3) THEN find land. Land is the exciting step and everyone wants to jump there first. The mistake: site conditions (slope, drainage, soil, utility access) hugely affect construction cost. Your builder needs to be involved in land choice — what looks like a great lot might add $40K of site prep that wrecks your budget. Find builder first, then look at land together.

Steps 4–12 — the rest of the build

• 4) Preliminary design + home pricing. Work with your builder to scope the home and align it with your budget. This isn't your final design (modifications happen once you've got land), but it establishes the financial frame.
• 5) Submit offer on land + contract negotiation. Negotiate an option/feasibility period long enough to get your final plans and specs together — typically 60–90 days, longer if you can.
• 6) Submit the land + construction contract to us. We update your loan disclosures with real numbers. You'll review them with your loan officer.
• 7) Order appraisal + title. An appraiser uses your plans, specs, and the land to determine the "as-built" value — what the finished home will appraise for. We cannot lend over that value, so this step is critical.
• 8) Closing + funding. You sign at the title company. Funds move from the lender to the title company over a few days (this is the "funding" step). Once funded, your builder can start.
• 9) Begin construction. Your builder submits draw requests as work progresses; we review the work in place against the cost breakdown and release funds by percentage of completion. Contingency reserves are not required on our OTC programs, but we strongly recommend planning for one (typically 10–20% of the build) since most projects discover something.
• 10) Construction completion. Final inspection. Certificate of occupancy. Your builder is paid in full. You get keys.
• 11) Conversion to permanent. On a true OTC, this happens automatically — no new closing, no requalification. Your construction-period loan becomes your permanent mortgage and you start your regular monthly payments.
• 12) Tell us how we did. Reviews matter. If we did right by you, telling other Veterans, builders, and friends is how we keep doing this work.

Builder registration — what we collect

Every lender that does construction lending — us included — has a builder registration process. Builders aren't registered with HUD or any agency for construction loans; each lender registers builders on a case-by-case basis. Registration lets us confirm your builder has the financial capacity, experience, and insurance to complete your build on budget and on schedule.

Here's what we collect during builder registration. Your builder provides this directly to us — it doesn't slow your timeline:

• Company information — entity type, ownership, years in business, license number
• Project history — completed builds, current projects, references from previous clients
• Trade references — vendor / supplier credit references and pay history
• Credit references — bank line, current lender relationships
• Licensing — state contractor license (where required), local permits
• Insurance — General Liability and (where applicable) Workers' Compensation
• Financial statements — primarily on site-built scopes; we look at builder capacity for the size of build

If you've got a builder you love but they've never done a construction loan through a lender, that's fine — we walk them through the registration. Once we have the full packet, the review itself typically takes just a few business days. We'll flag anything that needs adjusting early so the file keeps moving.

Land scenarios — buying, owned, or tearing down

Construction loans handle three land situations cleanly:

• Buying land + building (most common): The land purchase is rolled into the construction loan. You close on land + construction in one transaction; no separate lot loan first.
• Already own land (free and clear or with a small lot loan): Equity in the land counts as down payment. If you bought the lot a year ago for $80K and it now appraises for $120K, your equity contributes to the LTV calc on the construction loan.
• Tear-down + rebuild: Demolition cost and disposal of old materials are factored into the construction budget. The "as-built" appraisal values the new home, not the structure being torn down.

Construction draws — how money flows during the build

Construction funds don't sit in an escrow or interest-bearing account at closing — they're funded from the lender as draws are released. As the build progresses, your builder submits a draw request against the project's cost breakdown — the line-item budget covering everything from foundation and framing to mechanicals, drywall, and finishes.

Each draw is based on percentage of completion. We review the work in place and go through the cost breakdown line by line, marking how far along each item is, and release funds for the portion that's actually complete. Our default is 5 draws on site-built homes and 3 on modular or manufactured — we can add more if your build calls for it. You sign off on each draw release.

Contingency: Not required on our OTC programs — but highly recommended. A 10–20% contingency on the construction budget gives you a buffer for the inevitable surprises (hidden site conditions, change orders, material price spikes). Unused contingency reduces your loan balance at completion, so you don't pay for what you didn't use.

Conversion to permanent — what happens at completion

When construction is complete (certificate of occupancy issued, builder paid in full, all inspections passed), the construction-period loan automatically converts to your permanent mortgage. No new closing. No new credit pull. No new rate lock.

Automatic float-down at conversion. Rates often move during a 6–12 month build. At conversion, we automatically float your rate down to current market — no request required, no market-movement benchmark to hit. It's just part of our standard process. You finish the build at today's rate, not 12 months ago's.

Your permanent mortgage uses the term and structure you selected at the original closing. You start making regular principal-and-interest payments. The lien on your home is now a standard mortgage, refinanceable down the road if rates drop further.

Eligible home types

• Site-built homes (including barndominiums) on a permanent foundation
• Modular homes (factory-built sections assembled on permanent foundation)
• Manufactured homes on permanent foundation — single-wide and multi-wide both eligible (varies by program)
• Primary residence (most programs) and second home (select programs)