— CONSTRUCTION TO PERMANENT LOAN

Construction-to-Permanent

Loans (Single-Close)

Build your custom home with a single-close construction loan that transitions into permanent financing.

— CONSTRUCTION-TO-PERMANENT LOAN

Construction
to Permanent Loan

Building a custom home typically means dealing with two separate loans – a short-term construction loan to fund the build, and a permanent mortgage once it’s complete. That means two applications, two sets of closing costs, and two closings. A Construction-to-Permanent loan – also called a single-close construction loan – rolls both into one.

You close once before construction begins. The loan funds the build in stages as work progresses, then converts automatically into your permanent mortgage when the home is complete. No second closing, no requalification, no scramble to lock a new rate when you’re already deep into a project.

Pacific Home Loans offers construction-to-permanent financing for qualified borrowers building custom homes, including primary residences, homes with attached or detached ADUs, and situations where you already own land and want to finance construction on top of it.

→ Renovation & Construction Loan Options

— CONSTRUCTION-TO-PERMANENT LOAN

How a Construction-to-Permanent
Loan Works

Understanding the structure before you start is the best way to avoid surprises during the build. Here is how the loan flows from start to finish.

A Construction-to-Permanent loan combines both a short-term construction loan and a separate permanent mortgage into one transaction.
Potential benefits: one closing instead of two, permanent rate selected at initial loan submission (subject to program terms), automatic conversion to permanent financing upon completion, and reduced overall closing complexity.

Illustrative Deal Structure Example

The following example is hypothetical and provided for educational purposes only. Actual terms depend on underwriting guidelines and borrower qualification.

  • Construction cost: $1,000,000
  • Land cost: $500,000
  • Total project cost: $1,500,000

Assuming 75% loan-to-cost (LTC): $1,125,000 Loan Amount. Down payment requirement (25%): $375,000. If you already own the land with equity, required cash to close may be reduced.

Actual loan-to-cost limits, land equity treatment, and required cash to close vary based on borrower profile, credit strength, property type, and lender guidelines.

What Can Be Financed?

  • Building a custom primary residence
  • Building a custom home with an attached or detached Ohana (ADU), subject to guidelines
  • Refinancing land and constructing a new home
  • Purchasing land and financing construction in one structure (case-by-case)

Loan amounts may be available up to $4,000,000, subject to underwriting approval.

During the Construction Phase

  • Funds are disbursed in stages according to a draw schedule
  • Inspections confirm progress before each disbursement
  • Interest-only payments may apply during construction (subject to program terms)
  • Construction periods typically range from 6 to 18 months

Permanent Loan Phase

Once construction is complete and a Notice of Completion is issued, the loan converts automatically to permanent financing, the amortization period begins, and no second closing is required.

→ Fixed Rate Mortgage
→ Adjustable Rate Mortgage

— CONSTRUCTION FINANCING

Construction Package
Requirements

Lenders underwrite the borrower and the project. On the project side, you will need to come prepared with documentation that demonstrates the build is well-planned, properly permitted, and being executed by a qualified team.

Standard documentation includes:

  • Licensed general contractor
  • Executed construction contract
  • Detailed plans and specifications
  • County-issued building permit
  • Budget and draw schedule
  • Payment and performance bond (when required)

Coming to the table with a complete, organized construction package makes a material difference in how smoothly the approval process moves. Gaps in documentation are one of the most common sources of delay in construction loan underwriting.

When the Project Needs More Flexibility

Not every custom build fits a standard agency construction loan. Higher-value projects, complex lot situations, unusual construction timelines, or builds that exceed conventional loan limits may require a different approach.

For these scenarios, structured portfolio construction solutions may be available – with more flexibility on loan amount, project type, and qualification criteria than agency programs allow.

→ Portfolio Loans & Flexible Financing Solutions

— COMMON QUESTIONS

Construction-to-Permanent
Loan FAQ

Have a question not answered here? Our team is available to walk through your specific scenario.

You close once, which means one set of closing costs, one application and approval process, and a locked permanent rate established before construction begins. With a two-close structure, you face a second underwriting process and a new rate lock at a point in time you cannot control – right when you are trying to move into your finished home.

Not necessarily. Some programs allow you to purchase the land and finance construction in a single transaction. If you already own the land, that equity may reduce the cash required at closing. Both scenarios are worth discussing early.

In many cases, yes – subject to program guidelines. If adding an ADU is part of your plan, flag it at the start. It affects how the loan is structured and what documentation is required.

Construction timelines do not always go according to plan. Extensions may be available depending on program terms and the reason for the delay. This is another area where experience matters – we have worked through construction delays before and know how to manage them.

Loan amounts up to $4,000,000 may be available through standard programs, with higher amounts potentially available through portfolio solutions for qualified borrowers.

During construction, you make interest-only payments on the funds drawn to date – not on the full loan amount. Full amortized payments begin when the loan converts to permanent financing at the completion of construction.

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