Build your dream home without worrying about your long-term mortgage
Finance your home from the ground up with a Two-Time Close Construction Loan. Separate your construction loan from your permanent mortgage, giving you greater flexibility if your plans, finances, or market conditions change during the build.
What is a two-time close Construction Loan?
A two-time close construction loan is a type of construction financing that separates the building phase from your permanent mortgage. Instead of financing your home construction and long-term mortgage with one closing, you'll first close on a short-term construction loan that funds the purchase of your lot (if eligible) and the construction of your new home. Once construction is complete and your home receives its final inspection and certificate of occupancy, you'll complete a second closing to secure your permanent mortgage. Although this financing option involves two closings, it also provides greater flexibility. Rather than locking in your permanent mortgage before construction begins, you'll have the opportunity to choose your long-term financing when your home is finished. If your financial situation changes, your home building plans evolve, or market conditions shift during construction, a two-time close gives you more options as you prepare to move into your new home.
Highlights
Two-time close Construction Loan features
Loan amounts to conforming limits
Why choose a two-time close Construction Loan?
You might wonder "why would I choose two closings over one?" While a two-time construction loan might not be the right choice for everybody, it does have its perks. Your home could take months, or even over a year, to build. During that time, interest rates, your finances, and even your home building plans may change. With a Two-Time Close Construction Loan, you choose your permanent mortgage after construction is complete, giving you the opportunity to select financing that fits your needs at move-in instead of pre-construction.
Situations that could benefit from a two-time close Construction Loan
Job promotion/loss
You may get promoted and have the ability to put more money down to lower your monthly payments ; or you lose a job and need to adjust your loan terms
Improved credit/debt-to-income
This could mean you qualify for better loan terms and potentially rates
Market rate improvement
If the market interest rate improves from the time you start construction to the time you move-in, you can take advantage of lower rates without refinancing
Home sale proceeds
If you sell another home after construction on your new home begins, you can use those proceeds to lower your next mortgage amount
Unexpected costs
Whether it's emergency medical costs, a new child, or a new car, you can rest easy knowing you're not locked into your mortgage yet & can adjust around your situation
Construction changes
The construction process can come with unexpected roadblocks, or you might decide you want certain add ons which can change your timeframe and your financial picture
Considerations when choosing a two-time close Construction Loan
A two-time close Construction Loan can be great for many different reasons, but it's important to keep in mind the following:
- You'll have to apply (and qualify) twice. Once for your Construction Loan, once for your permanent mortgage (but this could benefit you if your credit, debt, or financial situation improves)
- Two sets of closing costs. Since you'll have two closings, you'll have two sets of closing costs
- You'll be making interest-only payments during construction. This is kind of a pro and acon. While the payments will be lower during the construction period, they also won't be applied toward lowering yourprincipal or building equity
What to know before getting a two-time Construction Loan
- Min credit score: 680
- Min loan amount: $100,000
- Max lan amount: conforming loan limits
- 1-2 unit primary residences & 1-unit second home
- Min 10% down payment
- Interest-only payments during construction
- Land/lot financing available
- Up to 12 months initial construction term; up to 6 months extension
How it works
- Apply for your Construction Loan: Meet with a construction lending specialist to review your project, determine your budget, and apply for construction financing.
- Close & start building: Close on your construction loan so your builder can begin work. Funds are released in scheduled draws as construction milestones are completed.
- Build your home: During construction, you'll typically make interest-only payments while inspections verify each phase of the project.
- Apply for your permanent mortgage: As construction nears completion, you'll work with your lender to apply for your long-term mortgage based on your current financial qualifications and financing goals.
- Complete your second closing: After your home passes its final inspection and receives a certificate of occupancy, you'll close on your permanent mortgage and move into your new home.
Frequently Asked Questions
We’re here to help! Find answers to your everyday banking questions.
A Two-Time Close Construction Loan is a construction financing option that separates your construction loan from your permanent mortgage. You'll first close on a short-term loan to finance the construction of your home. Once construction is complete, you'll apply for and close on a separate permanent mortgage.
A Two-Time Close Construction Loan has two financing phases. First, you'll obtain a construction loan to fund the building process. During construction, funds are released to your builder in scheduled draws as work is completed. After your home passes its final inspection and receives a certificate of occupancy, you'll apply for and close on your permanent mortgage.
A Two-Time Close Construction Loan offers greater flexibility because your permanent mortgage isn't finalized until your home is complete. This allows you to evaluate your financing options, choose the mortgage that best fits your current financial situation, and potentially take advantage of changes in market conditions before closing on your long-term loan.
Yes. Because a Two-Time Close Construction Loan separates the construction loan from the permanent mortgage, you'll complete a second mortgage application and closing once your home is finished.
During construction, borrowers typically make interest-only payments on the amount that has been disbursed rather than paying principal and interest on the full loan amount. Once construction is complete and you close on your permanent mortgage, you'll begin making regular monthly mortgage payments.
Yes, eligible borrowers may be able to finance the purchase of their lot along with the construction costs using their construction loan. Speak with a construction loan specialist to determine eligibility.
In most cases, you'll work with a licensed, approved builder who meets our requirements. We can explain the builder approval process and any qualifications that may apply.
Unlike many One-Time Close Construction Loans that follow standard agency construction timelines, Two-Time Close Construction Loans can provide greater flexibility for longer or more complex custom home projects. In most cases, you can extend your project ot be as long as 18 months.
After construction is complete, your home will receive a final inspection and certificate of occupancy. You'll then apply for your permanent mortgage, complete your second closing, and transition into your long-term home loan.
Credit requirements vary by lender and loan program. CMG's Two-Time Close Construction Loan is available to qualified borrowers with credit scores as low as 680.
Qualified borrowers may be eligible to purchase or build with as little as 10% down. Your required down payment will depend on factors such as your loan amount, occupancy type, and financial qualifications.
Yes. Eligible borrowers may use a Two-Time Close Construction Loan to finance a primary residence or an eligible one-unit second home, subject to program guidelines.
A Two-Time Close Construction Loan is designed to keep your permanent financing separate from your construction loan. Because you'll obtain your permanent mortgage after construction is complete, you'll choose your long-term financing closer to your move-in date.