It’s easy to get tunnel vision when you’re building a new home and it’s nearing completion. You can practically feel that beautiful wooden banister and picture your shoe collection in that marvelous walk-in closet. These visions keep you going when your home is being built, but before you pack up those shoes, you want to make sure you understand the loan process, especially how your permanent loan finalizes.
APM offers both one-time close and two-time close construction loan options, allowing homebuyers to choose the structure that best fits their goals, timeline, and comfort level with market conditions.
With a two-time close construction loan, the first loan covers the cost of the land, building materials, labor, and required permits. Because this loan funds the construction phase, it is always a good idea to get pre-approved early to better understand your budget and borrowing power. APM Loan Advisors can help guide you through this process.
During construction, which typically takes 12 to 18 months, payments are usually interest-only and based on the funds that have been drawn. Construction loans function similarly to a line of credit, releasing funds in a series of draws as specific phases of the build are completed. Interest is calculated only on the amount used, and payments can often be made monthly or structured into the loan.
As construction nears completion, permanent financing becomes the focus. With a two-time close, you will qualify for your permanent mortgage toward the end of the build, typically 45 to 60 days before completion. With a one-time close, your permanent financing is already approved upfront, and the final steps are focused on inspections and receiving the certificate of occupancy.
Your APM Loan Advisor will help coordinate each stage of the process, ensuring a smooth transition from construction to long-term homeownership, regardless of which construction loan option you choose.
Collecting Documents and Credit Check
First, we’ll collect updated versions of the documents we collected when we did your construction loan. This will include bank statements and pay stubs, as well as any life, income, or employment changes. There may also be additional documentation that we ask for at this time.
You’ll want to keep your credit score high during the construction process and avoid any credit pitfalls. We’ll need to run a new credit report as part of the permanent financing application process.
Appraisal
A new appraisal isn’t always necessary, but it can be beneficial during a two-time closing. That’s because you might be able to adjust your permanent loan based on this appraisal. If your appraisal comes back higher than the original value, you can use the new appraisal value to adjust your loan amount. Both VA and conventional loans allow for cash-out refinancing, so you might even be able to tap your equity at this time. Your APM Loan Advisor will be happy to discuss these options with you to see if this is the right strategy for your situation.
Approving Your Loan
Once we’ve got your final appraisal, your loan will go through our underwriting department for final approval. You have a few options for your permanent mortgage, which will have been discussed when you applied for your construction loan. These include FHA, conventional, and VA loans. Each has its own advantages, as your APM Loan Advisor will have laid out. They’ll also review everything to ensure that what you thought you wanted back when you started still works for you.
In a way, this final loan is like a typical refinance, meaning that you’ll start paying your loan off like any other permanent mortgage. You can choose from 30-, 20-, 15-, and 10-year fixed-rate financing.
Many borrowers choose to secure a specific program and lock their loan rate before construction even begins. These long-term locks can bring peace of mind, knowing you won’t have to pay a higher rate once construction is completed. And don’t worry—your loan officer will go over any changes in the market and discuss whether you want to keep the locked rate or select a new one if interest rates go down. We’ve got you covered!
Closing
Our goal is to have your final closing right after your final inspection, but the process can vary based on the builder and local requirements. You’ll need to be ready to pay your closing costs and sign the final paperwork. This will likely happen at a title company, so be sure you bring an up-to-date proof of identity with you, like your driver’s license or passport.
Certificate of Occupancy
This is one of the last pieces that comes into play when a home is being built. Ironically, in many cases, this isn’t even a physical certificate! It simply means your local government approved your home for occupancy and the home follows all the required building codes. Just because it isn’t a physical document doesn’t mean it isn’t important, however. You need the certificate of occupancy to legally move in once construction is complete, which means we need it before we can fund your loan!
Move In!
Once your loan is finalized, funding typically occurs the day after signing unless a different timeline is needed. From there, it is time to move into your new home and begin the next chapter of homeownership. At this stage, your loan transitions to a traditional mortgage, with monthly principal and interest payments beginning as outlined in your loan terms.
At APM, we work to make the construction loan process as streamlined and straightforward as possible from start to finish. If questions come up along the way, your APM Loan Advisor is always available to explain each step and provide guidance tailored to your situation.
To learn more about the full construction loan journey, explore our Construction 101 resources and connect with an APM Loan Advisor when you are ready to get started.