Construction Loan

ONE-TIME-CLOSE CONSTRUCTION LOAN FAQs

A “one-time-close” financing arrangement for a construction loan combines the three phases of a two-time close into a single, streamlined process. With the “one-time-close” transaction, the interim and permanent loan financing closes prior to construction. In essence, Capital City Home Loans acts as both the interim construction lender and the permanent mortgage lender.

BUILDER PHASE

  • Borrower chooses a builder
  • Builder eligibility and review
  • Cost-to-Construct is prepared (purchase contract) and executed by all parties

CONSTRUCTION PHASE

What happens if my construction phase goes over 12 months?

Homebuyers may request an extension approved initially at 3 months and then additional 1-month extensions (limited to 3 consecutive) until completion, not exceeding 18 months.

Will I have to requalify once my home is completed?

Homebuyers with credit reports and appraisals not exceeding 18 months will not have to requalify if the following conditions were met at the time of original closing:

  • Down payment is at least 30% (70% loan-to-value ratio)
  • Homebuyer(s) have a minimum 700 credit score

Is insurance required during the construction phase of my loan?

  • Builders Risk insurance is required during the construction phase
  • If the property is located within a Special Flood Hazard Area (SFHA), a Coastal Barrier Resources System (CBRS) or Otherwise Protected Area (OPA), flood insurance is required
  • Once the house is complete and before the loan converts to permanent financing, a 12-month prepaid homeowners insurance policy is required

MODIFICATION PHASE

Can I raise my loan amount after closing to cover upgrades and/or overages?

Changes cannot be made to the loan amount after closing; any upgrades, overages or additions to the original construction cost are paid by the borrower.

Can I remove Mortgage Insurance (MI) at the time of modification?

Yes, with the following conditions:

  • If the request is made to cancel MI in conjunction with a principal reduction at modification, an appraisal is required at the borrower’s expense
  • If the request is made to cancel MI without a principal reduction, refinancing with a new application is required

If questions or concerns arise during the construction phase (after closing), click here to refer to our website, or contact your mortgage consultant.