Single or Two Time Close?
The Two Time Close
There use to be a time, many years ago, that if you wanted to borrow money to build a home you had to get a construction loan. Once the home was completed you had to refinance that construction loan into your end or permanent financing. You paid 2 sets of fees, fill out 2 applications, qualify twice and close twice.
If your financial or credit situation changed from the construction loan to when you applied for your end loan you could be in for trouble. You might have had to pay a higher rate, higher fees or worse off, you might not qualify for the end loan. This meant you would have to sell your brand new home to pay off the construction loan or lose that home to foreclosure.
The Single Close
Fortunately we now have single close loans. One application, one closing and one set of fees. These single close loans have 2 phases, the construction phase and the end loan phase. When you are finished building your home you don’t have to refinance. You simply sign a modification agreement that states that your loan is being modified from an interest only payment construction loan to your end loan.
Assume that any loan I offer you is a single close loan unless I tell you otherwise. The Conventional, FHA and VA programs I represent are single close loans. About the only time I have to offer a Two Time Close is if you are going to be your own General Contractor.