One loan. One closing. Your custom home.
Most people assume building a home means two separate loans, two closings, and requalifying at the end. It doesn't. A single-close construction loan wraps the entire build into one mortgage that automatically converts to permanent financing when construction is complete.
Available Programs
Two programs. Same single-close structure.
Conventional
Fannie Mae / Freddie MacVA
For eligible veterans & service membersWith a VA construction loan, interest during the build is financed as part of the construction budget. Your builder's contract includes an interest reserve line item that covers the monthly interest-only charges as the loan balance increases. You don't write a check until the home is finished and the loan converts to permanent.
The Payment Path
Construction payments aren't as scary as they sound.
During construction, you only pay interest on the amount that's been drawn. Not the full loan. The balance builds gradually as your builder completes each phase, so your payments start small and increase over time.
At closing, only the land payoff ($100K) and initial draw ($50K) are outstanding. You pay interest only on that $150K, not the full $500K. As each draw is released, the balance and payment increase gradually.
Once construction is complete and you receive your Certificate of Occupancy, the loan converts to a standard fully amortized mortgage. That's when your permanent payment ($3,327/mo in this example) begins.
Your down payment and any cash contributions are depleted before loan funds are drawn. This keeps the outstanding balance lower in the early months, saving you interest and reducing your payments during construction.
The formula: Outstanding Balance x Rate / 12 = Monthly Interest-Only Payment
Example: $150,000 x 7.00% / 12 = $875/month
The Roadmap
From pre-qualification to moving in.
Pre-qualification + Clarity Call
We review your finances, budget, and timeline. I map out what you can build and what the loan structure looks like.
Secure your land
Already own it? Great, it becomes your equity. Need to buy it? Your agent helps you find the lot and we include it in the loan.
Hire and approve your builder
You select the builder. A third-party risk management firm reviews their qualifications, insurance, and track record (typically 3 business days). I don't refer builders, but your agent or title company can.
Submit plans, specs, and contract
Your builder provides the construction contract, detailed budget, and architectural plans. An "as-completed" appraisal is ordered based on the proposed build.
Close the loan
One closing. Your rate is locked. The initial draw (land payoff + first construction draw) is released. Construction can begin once permits are pulled.
Builder constructs, inspector verifies, funds release
As each phase is completed (foundation, framing, rough-in, drywall, finishes), a third-party inspector verifies the work. Once approved, the next draw is released to the builder. Lien waivers are collected at each stage.
You pay interest-only on what's drawn
Your monthly payment increases gradually as draws are released. VA borrowers: the interest reserve covers these payments so you pay nothing out of pocket during the build.
Certificate of Occupancy + final draw
Builder provides a Certificate of Completion. Final inspections are ordered. The last draw is released and the title policy converts to final (lien-free) status.
Free float-down review
Before the loan converts to permanent, we review current rates. If rates have dropped since you locked, you get a free float-down to the lower rate. If not, you keep your original lock. You win either way.
Loan converts to permanent. Move in.
The construction loan automatically modifies to a standard fully amortized mortgage. Your permanent payment begins. You move in. No second closing. No requalification.
Common Questions
What builders and buyers ask most.
Can I use land I already own as my down payment?
Yes. Equity in land you own can count toward your down payment. If you're on title at closing, the loan is structured as a limited cash-out refinance. If you're buying the lot as part of the transaction, it's a purchase.
What if construction takes longer than 12 months?
Extensions beyond 12 months require requalification. That means updated credit, income, and employment verification. If your financial picture has changed significantly, it could require restructuring. This is rare but it's why choosing a reliable builder with a realistic timeline matters.
Can I rent during construction without it counting against me?
Yes. Rent payments during the construction period are not included in your qualifying debt-to-income ratio.
What about barndominiums, cabins, or modular homes?
Barndominiums and cabins are eligible as long as there are comparable sales to support the appraisal. Modular homes are eligible under Fannie Mae and Freddie Mac guidelines. Tiny homes on wheels are not eligible. Manufactured homes (permanently affixed) are eligible with specific documentation requirements.
Can I be my own builder?
On a conventional loan, yes, for a primary residence only. You'll need to meet the same contractor approval requirements through the third-party review process, and additional contingency reserves may be required. VA does not allow owner/builder.
How many draws will I get?
Draw count is based on loan amount: up to $250K gets 5 draws, $250K to $500K gets 8, $500K to $750K gets 10, $750K to $1M gets 12, and above $1M gets 18. More than 12 draws requires an exception.
Why single-close instead of two-time close?
With a two-time close, you'd pay closing costs twice and requalify for the permanent loan after construction. If your credit, income, or rates changed during the build, you could end up in a very different position. Single-close eliminates that risk entirely: one closing, one set of costs, one qualification, one rate lock with a free float-down.
Ready to Build?
Bring the plans. I'll bring the financing.
Whether you have a lot, a builder, and full plans, or just an idea and a budget, I'll map out what's possible and what the real numbers look like.
Christian Kosko | NMLS# 1415795 | Fairway Independent Mortgage Corporation
NMLS# 2289 | Equal Housing Lender | Licensed in DC, MD, VA
Construction loan programs are subject to property eligibility, builder approval, borrower qualification, and program availability. Draw schedules, construction timelines, and loan terms may vary. Builder approval is managed by a third-party risk management firm. This page is for educational purposes only and does not constitute a loan approval or commitment. All loans subject to underwriting approval.