Texas one-time close construction loans, also known as “construction-to-permanent” loans, are a type of financing that covers both the construction phase and the permanent mortgage in a single loan package.  With a one-time close construction loan, borrowers only need to go through the loan application and approval process once. This simplifies the financing process compared to obtaining separate loans for construction and permanent financing.  Since the construction and permanent financing are combined into one loan, borrowers save time and paperwork. There’s no need to reapply for a mortgage once the construction is complete, which can be particularly beneficial if interest rates rise during the construction period.

One-time close construction loans typically offer fixed interest rates for both the construction phase and the permanent mortgage. This provides borrowers with stability and predictability in their monthly payments.  Unlike traditional construction loans that require two separate closings (one for the construction loan and another for the permanent mortgage), one-time close construction loans involve a single closing process. This saves borrowers time and closing costs.

During the construction phase, funds are disbursed to the builder or contractor in stages as work progresses.  Borrowers typically don’t make payments on the disbursed funds during construction. Once construction is complete, the loan converts to a traditional mortgage, and borrowers begin making principal and interest payments.

Borrowers need to meet the loan programs qualification requirements for both the construction loan and the permanent mortgage. This includes factors such as credit score, income, debt-to-income ratio, and down payment.

There will be specific requirements for builders or contractors involved in the project.  Builders need to be licensed, insured, and have a track record of completing similar projects.  Detailed project plans, construction contracts, and cost estimates before approving a one-time close construction loan.  Borrowers need to provide comprehensive documentation outlining the scope of the project.

One-time close construction loans can be an attractive option for borrowers in Texas looking to finance the construction of a new home while simplifying the loan process.