Construction loans are typically a short term loan to finance the building of a home and then transition to a long term mortgage loan. Traditional new home or stand alone construction consists of two loans. The homebuyer is expected to open a loan to pay for construction of the home and a second one for long-term financing. These processes are completely separate and might even involve two different lenders and two different interest rates.
However, a Single Close Construction to Permanent loan is a home mortgage that can be used to close both the construction loan and permanent financing of a new home at the same time.
With a Single Close Construction loan, the process is streamlined: A single mortgage loan originator, a single loan, and a single closing process. This saves money, helps reduce the time to move into your house, and protects you against unforeseen circumstances down the road. Single Close Construction loans are also referred to as "construction to perm", "one time close", "construction conversion", "CTP", or even "all in one" loans.
Getting a loan package for new home construction is notoriously difficult. Buyers must find a way to finance the land, the construction project, and the home. In many cases, they are required to get a “take-out” loan that verifies to the builder that they can afford the entire project.
The complex nature of new home construction means there are plenty of moving parts. Each time a buyer needs a new financing package, they have to re-qualify. They may also need to get the property appraised multiple times throughout the process.
GO Mortgage has not only simplified things, but has an in-house construction management team.
Using our years of experience and home-building expertise, our in-house construction experts review and approve documentation from every stage of construction.
In many cases, buyers find they are “on their own” when dealing with builders. They have little negotiating power and few resources if their builder does not meet all project requirements.
As a GO Mortgage client, our team will help keep your project on track every step of the way. This allows potential problems to be dealt with before they can turn into major delays.
You are always welcome to find and engage the builder of your choice as long as they meet the quality standards for our program. If you want advice and insight from our team, we can also help you choose from any of our pre-approved builders.
Our builder vetting process gets to the heart of what matters for you. We make sure that all builders accepted into our program have a sterling record of on-time completion for their home projects. Quality, safety, and efficiency are our top priorities.
Our completely hands-free building process means you never need to worry about applying for building permits or arranging inspections as your construction takes shape. It is all handled for you. Documentation you might need in the future is centralized all in one place.
The traditional construction loan process produces a lot of worry for borrowers. Because there are at least two different loans – one before construction begins and one after it ends – there is always the possibility that circumstances change and the second loan won’t close as expected.
Sometimes, new construction even requires a third “take-out” loan to prove you can pay for the construction project. That means more fees, more paperwork, and further risk of complications.
Over the years, this arcane process has left thousands of people struggling to put together new financing or negotiating a loan workout at a time when they should be enjoying the home they’ve always wanted. The one time close construction loan concept is designed to avoid all that.
Time and again, homebuyers point to loan qualification as the most stressful part of getting a new home – so why do it twice? With a Single Close Construction loan, you qualify at the beginning of construction.
Single Close Construction loan ensures that the loan terms you agreed to cannot expire and the loan documentation you receive will always be up to date. That means peace of mind when making the big decisions.
Having to qualify up to three times in home construction is a major risk to the buyer. If you have a bad investment, a change of career, or other temporary cash flow problems, you could end up losing your home and all you’ve invested in it – even if your overall financial picture is sound.
With one time close construction loans, there is no risk. Once you have qualified at the start of the process, you are in it for the long haul – just like your new home. You will never be at risk of foreclosure due to transient changes in your financial situation.
Many 30-year home loans have variable interest rates that can catch you by surprise as they “balloon” over time. Our one time close construction loan products offer predictable fixed rates.
Fixed rates persist throughout the construction loan and the permanent construction loan, so there are no surprises. Many of our clients qualify for favorable rates that make their lives easier.
Multiple loans mean multiple closings, each of which can cost thousands. The standard cost of closing is 3%-5%. GO Mortgage streamlines closing, which can save you lots of money. You may be able to finance less or save more for the purchases you want for your new home.
For both new and existing homes, appraisal valuation is a serious stumbling block. If appraised value of the home is lower than expected, it can endanger your financing package. Not so with Single Close Construction loans: One appraisal prior to loan closing and you’re all set.
Many loan programs have strict prohibitions on buying a second home or a home not intended as a primary place of residence. GO Mortgage can offer a number of programs for these situations, all with the same single close convenience.
Most mortgage programs are only for conventional construction. With us, you have the option of a modular, manufactured, or stick built home. You can build your dream home on your land no matter what form it takes – and we can help you get there.
All these benefits and more are available to our clients. After helping homebuyers from around the country, the factor that comes up again and again is an even simpler one: “Peace of mind.”
Loan qualification is the biggest hurdle for most home buyers – but it’s not as intimidating as it looks. Qualifying for a one time close construction loan is no more complicated than qualifying for a conventional home loan. If you’ve ever bought a property, you’re familiar with the steps.
Naturally, not everyone will qualify for a one time close construction loan. Your loan amount will depend on your overall financial health and risk level. The best way to find out more is to reach out to the GO Mortgage team to get complete answers to all of your questions.
“With the builder (and property), the lender GO Mortgage and us all in different states, I can assure you I was more concerned as to how smoothly this transaction would go. To add more layers of complexity, our builder was new to GO Mortgage, and this was a Single Close Construction to permanent mortgage on a modular vacation home. Even with all of those circumstances, the GO Mortgage team worked to keep things running smoothly and got it closed on time! I wouldn't hesitate to recommend them to anyone.”
- Michelle from Gulf Shores, Alabama
GO Mortgage is a direct seller and servicer to Fannie Mae and a Freddie Mac Direct Lender. We are also a Ginnie Mae issuer. That means we have access to virtually every home loan product out there. FHA, VA, and USDA loans are just a few of the available options.
When you choose one of these government-backed home loan products, it means that your lender must follow specific rules in what fees can be charged, what interest rates are allowed, and how the funds can be used. This helps protect buyers from unfavorable loan practices.
Remember, these loans are issued by an approved lender, not directly by the government.
Many federally-backed loan programs enable buyers to move forward on their home purchase with low or no down payment. Buyers who have poor credit are also protected as long as their current financial situation allows them to meet their mortgage obligations.
Naturally, all of our available loan programs can be used to finance new home construction. We also work with buyers to help them finance land when they do not already have a lot to build on.
Some of our most popular loans include:
FHA loans are designed for low- and moderate-income buyers and are especially popular for those seeking a starter home. They require lower down payments and lower credit scores than a conventional loan package.
Available only to qualified veterans and their eligible surviving spouses, a VA loan equips you to build, buy, repair, retain, or adapt a home. No down payment is required, closing costs are limited, and you cannot be charged a penalty for paying the loan in advance.
A USDA loan, also known as a rural development loan, is available in certain rural and suburban areas. These 30-year fixed rate mortgage loans do not require a down payment. Buyers can even finance their closing costs, minimizing additional expenses beyond the home’s upfront cost.
Fannie Mae is a government-sponsored company that guarantees loans, allowing lenders to extend loans to lower income home buyers with reduced risk. The program mandates a minimum credit score of 620 for fixed rate loans applied to single family homes.
You might find you don’t meet requirements for the programs above due to higher income, geographical limitations, or other factors. If so, GO Mortgage is there to help craft a single close construction loan package that meets your needs for your new home build.
A Jumbo Construction to Permanent (CTP) program aimed at supporting large scale projects outside of the parameters of conforming or high balance agency products. Max loan amount up to $1,350000 and $1,500,000 for non-high cost areas and high cost areas, respectively maximum loan amount is subject to LTV and FICO score restrictions.
GO Mortgage has developed a unique one time close construction loan process by bringing all of the needed expertise “in house.” As a direct seller and servicer to Fannie Mae, a Freddie Mac Direct Lender, and a Ginnie Mae issuer, we have access to nearly every mortgage product.
You can get your one time close construction loan as a jumbo loan, conventional loan or as well as any number of popular government-backed loan programs including FHA, VA, and USDA. Here’s how it works:
With our loan programs, you can choose your own builder or work with us to select a qualified builder for your project. We partner with dozens of builders all around the country. Eligibility begins by determining the specifications and costs of your construction project.
Once you’ve worked out parameters with your builder, a contract will be prepared. The contract covers everything you need to know about the construction process, such as timeline and what will be done about cost overruns. It also establishes your responsibilities to the builder.
After you’ve examined your contract in detail, you sign it. The finalized contract is forwarded to our construction underwriting team, who will also evaluate it. Signing the contract and getting the relevant documentation to all parties usually takes only a few days.
In underwriting, a financial institution takes on financial risk as part of a larger transaction. GO Mortgage underwrites the construction process. This means in the event the borrower can’t meet obligations or the builder does not perform as expected, we can take action.
The credit package for the long-term financing of the home must also be underwritten. With our underwriting services, you save time and money compared to conventional loan origination. For example, you do not need a 20% down payment or pricey mortgage insurance.
The closing of the loan package includes a final review of all the financial information submitted by the borrower, especially documentation of current income and financial liabilities. Because of the way our process is structured, loan closing is merely a formality for most borrowers.
Construction needs to begin within 30 days of the closing date. Your construction team will provide you with regular updates on the progress of your home. In general, it takes about one year for most homes to go from breaking ground to move in day.
With the one time close construction loan, you receive both the interim construction loan and the 30-year permanent loan at the same time. That means a single promissory note and one deed of trust. You sign the 30-year amortizing promissory note at closing.
Once the promissory note is signed, any liens on the land will be automatically paid off. A draw amount will be made available to the builder so construction can start right away. When the project is complete, you’ll receive a loan modification to amend the date for first payment.
After the loan modification is signed, the 30-year amortizing loan works like any other home loan. Fixed interest rates mean there’ll never be any surprises throughout the process of paying off your loan. All along, you will get to enjoy your dream home exactly as you imagined it.
Remember: Most of this process will be handled for you behind the scenes by the friendly team at GO Mortgage and your builder. All you need to do is be ready to discuss your needs with your builder and read contracts closely at each stage of the process. We will always be there to help!
Find the right builder and have them work directly with GO Mortgage.
GO Mortgage will work with you to determine if the home you selected is within your budget, and with your builder to determine the cost to build your home and finance it.
Once a purchase price is determined, you and your builder will provide a signed contract to GO Mortgage and the loan approval process will begin.
Your loan will be submitted for a construction project review and to our underwriting department to approve the permanent portion of the loan.
Once the paperwork is signed and your loan has closed, the construction of your new home can begin!
GO Mortgage will manage the construction phase from ordering draw inspections, and any state required surveys and inspections.
Whether you need a down payment for your loan depends on the specific loan program you decide to use. In a conventional home loan, most buyers need a down payment around 20% to access the most favorable loan terms. In some cases, this amount can be financed.
Our programs offer down payments anywhere from 0% to a maximum of 3.5%, a small fraction of what other lenders typically ask for. Not only that, but you can even finance down payments.
Credit is just one factor used to decide how much you can finance with your one time close construction loan. A credit score of 700 or above is considered low risk, while a score of 800 to 850 is exceptional – but even very affluent people do not always have a score this high.
Our one time close construction program does not specify a minimum credit score for your loan package. Instead, we will examine your entire financial outlook and work with you to find a loan solution that meets your needs. Current income and investments are weighted heavily.
No. Your first payment does not take place until after construction is complete.
Closing costs may vary depending on your situation and your total loan amount.
Ideally, new home construction is completed within about 12 months. Every step is taken by our in-house construction management team to complete the process in a timely manner. However, ultimate performance is up to the builder and unforeseen circumstances can happen. The type of home, its size, and the builder’s schedule all influence project length.
Yes. If you don’t have a builder or your builder isn’t approved for our program, just let us know. We will be glad to advise you on the options in your area. We have approved more than 60 firms throughout the country.
No. Your builder must complete all the work.
No. Investment properties and “spec” homes are not eligible.
Yes. Your land purchase can be rolled into your transaction – and covered in your single closing.
Yes. You must own the land for at least six months (in most cases) to use its appraised value.
Tear downs and rebuilds are available for some loan types, but not others. To get accurate information for your specific loan type, talk to your loan officer about your needs.
To find out more or get started with a one time close construction loan, contact GO Mortgage today.