What is a 1 time close loan?

A 1 time close construction loan is a permanent loan product consisting of construction and permanent financing combined into one product.

Under the one time close scenario the borrower takes out the financing for the construction of the home along with the permanent loan on the home. This allows the borrower to qualify 1 time and reduce the expense of two closings in the building of their new home. 

Under traditional housing practices, the builder obtains construction or interim financing to build the home. When construction is complete, the purchaser of the home pays off the builder with a permanent end loan. As a result the price the purchaser paid for that new home includes the interim financing cost incurred by the builder.

Just like a straight construction loan the house being built is funded by draws against the loan amount paid to the contractor or builder. As the draws are funded the borrower makes interest only payments on the amount of funds paid out or drawn.

Once the project is complete and the loan is 100% funded the lender will then modify the construction rider into a permanent note and the borrowers house payments become a traditional mortgage loan transaction.

A 1 time close loan product  is not the same as a construction to permanent loan. the construction to permanent loan converts the construction loan to permanent financing. The borrower has to qualify for each loan individually and there are 2 separate closings. 1 for the Construction loan and 1 for the permanent financing.