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Single Close Construction Loans Explained

construction worker working on building a house

In spite of the pandemic, the real estate market in North Central West Virginia remains strong and stable. With interest rates historically low, there has never been a better time to borrow money to buy a home—if you can find one before it gets snapped up! Alternatively, building your dream home gives you more control and flexibility with your budget, location, and timeline. And of course you get to choose every detail to suit your taste! So if you have been wondering if new construction is right for you, and what your home financing options are, keep reading!

What does a construction loan include?

A construction loan is a type of short-term financing to cover the costs associated with building your new home, including possibly the purchase of the land, pre-construction work on the land, and the construction process until your house is finished and receives a certificate of occupancy. Different types of construction loans include:

  • Single-close: Also known as construction to permanent, or one close construction loan, a single close construction loan is  generally considered the most convenient and cost-savings option. Once your new home is move-in ready, the short-term construction loan converts to a long-term mortgage loan without the hassle and expense of going through another closing.
  •  Construction-only: This type of financing must be refinanced or paid off once the construction process is complete. After the construction process is complete or a predetermined time lapses (generally nine to twelve months) you will need to pay your construction loan balance in full. If you are selling another house, you may be able to use the proceeds  to pay off your construction loan. Otherwise, you will need to apply for a traditional mortgage, which includes an application and a second loan with closing costs to payoff your construction-only loan.
  • Land loan: If you are ready to purchase land but plan to wait a while before building a new house, a land-only loan may be the best financing option for you.

With single-close construction loans, there is only one application and only one closing.

What is the easiest way to get a single close construction loan?

As mentioned above, a single-close construction loan is usually the easiest type of financing, especially if you already own the land and are ready to start building. All the advantages of single-close construction loans include:

  • Only one application: Applying for a home loan can be a time-consuming process, with several supporting documents to gather. Save yourself time and hassle by only doing it once with a single-close loan.
  • Just one closing: This is perhaps the biggest advantage of a single-close loan. For anyone who has borrowed to purchase a house, closing costs can be significant. Why pay them twice?
  • Lock in your interest rate: With rates at historic lows you may want to take advantage with a single-close loan today! Instead of waiting.
  • Peace of mind: Knowing you have your long-term permanent financing secured can give you one less thing to worry about during the construction process.

Once your new home is move-in ready, the short-term construction loan converts to a long=term mortgage loan.

How does a single close construction loan work?

Understand the process of applying for a single close construction loan:

  • Get project quotes from several reputable builders.
  • Choose a builder and review their contract.
  • Sign the final contract and send it to your lender for underwriting.
  • Qualify for a single-close construction loan based on your overall financial health and risk level.
  • Your project proposal will be reviewed for approval for both construction and permanent mortgage financing.
  • If your loan is approved by the underwriting team, a closing date will be scheduled.
  • After closing, it’s time for construction to begin!

 It can take up to one year for the construction process to be completed, from breaking ground to final inspection. Throughout construction, your contractor can submit requests for funding.

We're here to answer your construction loan mortgage questions

Talk to a Single Close Construction Loan Lender Today!

As your longtime community bank in North Central West Virginia, First Exchange Bank has made a conscious decision to remain independent and to invest in the communities we serve. If you are looking for a single close construction loan lender, we can help you find the best home loan financing to meet your needs. Start your application today, contact one of our loan officers, or visit your local First Exchange office in Mannington, Fairmont, Morgantown, Hundred, Fairview, or White Hall.


Still deciding between buying or building a home? Check out our related blog articles:

Buying a Home as a Single Woman? Check Our These Home Buying Tips

How Much Money Do You Need to Buy a House in West Virginia?

Choosing Between a Fixed Rate Mortgage and a Variable Rate Mortgage 


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