Construction & Renovation
One Time Close vs Two Time Close Construction Loans
Compare one time close and two time close construction financing: closing costs, rate risk, requalification at completion and which structure fits which builder.
Updated 2026-08-21| Applies to: Anyone financing a ground up build and choosing between structures.
The short answer
A one time close construction loan uses a single closing that covers both the build and the permanent mortgage, so you pay one set of closing costs and do not requalify at completion. A two time close uses a short term construction loan first and a separate refinance when the home is finished, which means a second closing, a second set of costs, and a new credit and income review at a rate you cannot know in advance.
Side by side
| Item | One time close | Two time close |
|---|---|---|
| Closings | One | Two |
| Closing cost sets | One | Two |
| Requalify at completion | No | Yes, credit, income and assets are reviewed again |
| Rate certainty | Structure is set at the single closing | Permanent rate is unknown until the second closing |
| Flexibility to shop later | Lower | Higher, you can shop the permanent loan |
The risk that decides it for most people
With a two time close, anything that changes between groundbreaking and completion can affect the permanent loan: a job change, a new car payment, a credit event, a shift in rates, or a change in guidelines. A one time close removes that exposure, which is why most owner occupied borrowers prefer it.
When a two time close still makes sense
- The builder or project does not fit the one time close program
- You expect a materially stronger financial profile at completion
- An investment or unusual property type needs a specialty permanent loan
General education, not a commitment to lend. Construction, land and renovation program terms, loan to value limits, draw procedures and builder requirements vary by lender, property and current guidelines, and they change over time. Manny Oloyede | Mortgage Broker | NMLS 1824463 | Ultimate Mortgage Brokers LLC. Equal Housing Opportunity.
Common mistakes to avoid
- Choosing on the construction rate alone and ignoring the second set of closing costs
- Assuming you will still qualify at completion after a job change
- Buying a vehicle or taking new credit during the build
Related loan programs
Frequently Asked Questions
People also ask
Do I make payments during construction?
On most one time close programs you pay interest only on the funds drawn to date, then the full payment begins after conversion.
Read: One Time Close Construction LoansDo I close twice?
Not with a one time close construction to permanent loan. You close once, and the loan converts at completion. A two time close structure has a separate construction loan and a separate permanent refinance, with two sets of closing costs.
Read: Construction to Permanent Loans ExplainedHow long does a draw take to fund?
Commonly a few business days from request to funding once the inspection is scheduled and lien waivers are in. Timelines are not guaranteed and depend on the inspector and title company.
Read: How Construction Loan Draws WorkHow much should my contingency be?
Many builders and lenders plan a contingency in the range of five to ten percent of hard costs. Larger custom projects and older lots with unknown site conditions justify the higher end.
Read: How to Finance a Custom Home BuildCan I use land equity as my down payment?
Often yes. Land owned free and clear commonly counts toward equity in the construction project, subject to program rules and the appraised lot value.
Read: Land Loans vs Construction LoansShould I pay cash for the lot?
If you can do it without draining the reserves the construction loan will require, paying cash simplifies the future approval and maximizes the equity credit.
Read: Buying Land Now and Building LaterTerms used in this guide
- Construction to Permanent Loan
- Financing that funds a home build in draws and then converts to a long term mortgage at completion without a second closing.
- Closing Costs
- The lender, title, government and prepaid costs due at closing, separate from your down payment.
- Rate Lock
- A lender's commitment to hold a specific interest rate for a set number of days, subject to the terms of the lock and the loan closing on time.
Written by
Manny Oloyede, Mortgage Broker
NMLS #1824463 | Ultimate Mortgage Brokers LLC NMLS #2619461 | Licensed in OH | KY | NC | PA | SC | TN | TX
I have worked in mortgage lending since 2018 out of the Akron / Cuyahoga Falls Branch, helping buyers, homeowners and investors across Northeast Ohio and every state where I am licensed. These guides reflect the questions I answer most often, written the way I would explain them on a call.
Keep reading
Construction to Permanent Loans Explained
How a construction to permanent loan works: the build phase, interest only draw payments, inspections and the conversion to a standard mortgage at completion.
Construction & RenovationConstruction Loan Down Payment and Loan to Value
How construction lenders set the down payment using loan to value and loan to cost, how owned land counts as equity, and how occupancy changes the limits.
Construction & RenovationBuilder Requirements for Construction Loans
What lenders review before approving your builder: licensing, insurance, experience, references, financial capacity and the construction contract itself.
Construction & RenovationConstruction Loan Timeline and What Delays It
What happens between application and certificate of occupancy on a construction loan, and the delays that most often push a build past its planned completion.
Questions about your own numbers?
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