If you’re ready to build your dream home, one of the first questions you’ll face is how to finance the construction. Unlike buying a move-in-ready house, building from the ground up requires a different kind of mortgage—and that’s where a One-Time Close Construction Loan comes in.
This streamlined loan option is ideal for buyers who want to simplify the financing process and avoid multiple closings. Whether you’re just getting started or already talking to lenders, this guide will walk you through everything you need to know about using a one-time close loan to build your home.
What Is a One-Time Close Construction Loan?
A One-Time Close Construction Loan—also called a construction-to-permanent loan—allows you to combine your construction loan and permanent mortgage into one single loan, with only one closing.
Instead of applying for a construction loan now and a separate mortgage later (and paying closing costs twice), this loan wraps both stages into one package. When construction is complete, the loan automatically converts to a standard mortgage—no reapplying, no second approval, and no surprises.
This is especially helpful when building a custom home, where timing and coordination between financing and construction can be tricky.
FHA One-Time Close Construction Loan: A Smart Option for First-Time Builders
For buyers with smaller down payments or average credit, the FHA One-Time Close Construction Loan is one of the most accessible options. Backed by the Federal Housing Administration, it’s a government-insured loan that supports new construction for owner-occupied primary residences.
Benefits of FHA One-Time Close Loans:
- Down payments as low as 3.5%
- More flexible credit requirements (typically 620+)
- Finance land, construction, and mortgage in one loan
- Only one set of closing costs
- Locked-in interest rate from the beginning
We’ve worked with many clients who used this loan type to build their first custom home—it’s a great fit for buyers who want predictability and simplicity in their financing.
One-Time Close Construction Loan Requirements
Wondering if you qualify? Here are the general requirements for one-time close construction loans—these may vary slightly by lender:
Credit Score
- FHA Loans: Minimum of 620 (some go as low as 580)
- Conventional Loans: Typically 680–700+
Down Payment
- FHA: 3.5% minimum
- Conventional: Often 10%–20%
Builder Approval
Your builder must be licensed, insured, and approved by the lender. (Good news—we meet all those requirements.)
Construction Plan & Budget
Lenders need to see detailed build plans, specs, and cost breakdowns. We help you prepare these documents as part of our process.
Land Ownership
You can include the cost of land in your loan—even if you don’t already own it. Some buyers use the loan to purchase both land and construction.
Can I Use a One-Time Close Loan to Build a Custom Home?
Absolutely. These loans were created to support new home construction—including custom and semi-custom homes. They’re ideal for buyers who want:
- More control over home layout and design
- To build on land they already own (or plan to buy)
- To avoid the complexities of juggling multiple loans
At Davis Custom Homes, we regularly work with buyers who are using one-time close loans, and we can help coordinate every step—from documentation to inspections.
Why Work With a Builder Who Understands One-Time Close Loans?
Not all builders have experience working with lenders on construction loans—and that can create delays or miscommunication. Here’s how we help:
- We’re already approved by many OTC lenders
- We help you prepare lender-required documents (budget, plans, contracts)
- We coordinate inspections and construction milestones with draw schedules
- We guide you from loan approval to move-in day—so you’re never guessing
Frequently Asked Questions
What credit score do I need for a one-time close loan?
Most FHA one-time close loans require a credit score of 620 or higher, but some lenders may go lower.
Can I use a one-time close loan to build on my own land?
Yes! The loan can include land you already own or land you plan to buy.
Do I need a licensed builder?
Yes. Lenders will only work with licensed, insured builders who meet specific requirements. We’re fully qualified and approved by several major lenders.
How long does construction take with a one-time close loan?
Most builds take 6–10 months depending on size, complexity, and weather. We’ll create a timeline that aligns with your loan and lender expectations.