Construction / Permanent Loan
This structure is called a 'one-step' or 'single close' loan.

Separate Construction and Permanent Mortgages
This structure is called a 'two-step' or 'two-close' loan.

Construction/Permanent Loan

This structure is called a 'one-step' or 'single close' loan. We provide both the construction financing and permanent financing in a single loan. During the construction phase, periodic draw payments are made to the builder based upon work completed. Monthly interest payments are billed to the borrower. At completion, the loan modifies to a permanent loan. The construction interest rate and permanent loan rate can be locked to protect the buyer from increases in interest rates during construction. We have different options within our one-step loan to help with your specific needs.

The single-step structure has the following advantages:

• A single lender is used throughout the process.
• There may be local and federal tax advantages of a single step loan.
• Closing costs duplication is minimized.
• The interest rate during construction and the permanent loan rate can be locked.

Separate Construction and Permanent Mortgages 

This structure is called a 'two-step' or 'two close' loan. We typically provides the construction financing with periodic draws.

Monthly interest payments are billed to the borrower. At completion, a 'take-out' permanent loan is obtained from the same bank or another source.

The two-step structure is commonly available and widely used. The principal disadvantages are:

There are two sets of closing costs (usually title insurance, documentation and loan fees).
Transfer or stamp taxes are not minimized.

Construction cannot begin until all requirements for the take-out financing are completed.

Your situation (employment, cash reserves, family situation) may change before your permanent loan closes, and you may no longer qualify for the loan.