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Building Your Dream Home: How a Construction-to-Permanent Loan Works

  • Writer: Kaylee Browning
    Kaylee Browning
  • Jul 31
  • 2 min read

If you're planning to build a custom home, one of the first questions you might have is: How do I finance it if the home doesn’t exist yet?


That’s where a construction-to-permanent loan (also called a construction-to-perm or CTP loan) comes in. It’s a financing solution designed specifically for custom home builds—and it can simplify your journey from blueprint to move-in day.


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What Is a Construction-to-Permanent Loan?


A construction-to-permanent loan covers both the cost of construction and the mortgage on the completed home. Depending on the lender, there are typically two main types of CTP loans:


One-Time Close


  • You close once—before construction begins.

  • The loan automatically converts into a permanent mortgage after the home is built.

  • You only pay one set of closing costs.

  • Fewer steps, less paperwork, and more convenience.


Two-Time Close


  • You take out a short-term construction loan first.

  • Once the home is complete, you refinance into a permanent mortgage.

  • Two closings = two sets of closing costs, but sometimes more flexibility in choosing long-term loan terms.


Some homeowners prefer this option if they want more control over their long-term financing or expect their financial situation to change between the start and end of the build.


How the Process Works


Here’s a typical timeline with either option:


1. Loan Pre-Approval & Budgeting You'll work with your lender and builder (that’s us!) to:

  • Get pre-approved

  • Finalize a construction budget and timeline

  • Lock in rates (if available) for the construction and/or permanent phase


2. Construction Phase During construction, your lender pays us in draws as certain milestones are completed—foundation, framing, roofing, etc.During this phase, you’ll typically only make interest-only payments on the disbursed funds, helping keep costs down while your home is being built.


3. Transition to Permanent Loan

  • One-time close: Your loan automatically converts into a traditional mortgage—no extra paperwork or fees.

  • Two-time close: You’ll refinance into a new mortgage after construction is complete. There’s a second closing, but also potentially more flexibility in loan terms.


Why This Option Works Well for Custom Builds


  • Streamlined financing from start to finish

  • May offer interest-only payments during construction

  • Protects you from fluctuating rates (depending on lender and loan type)

  • Gives your builder confidence that funding is secure


Ready to Explore Your Options?


We partner with experienced lenders who offer both one-time and two-time close construction-to-permanent loans. If you're planning to build in the next 6–12 months, it’s smart to explore financing now and get your plan in motion.


Let’s chat! We’re happy to answer questions and connect you with a trusted lender who fits your goals. Building a custom home is one of the most rewarding things you can do—and we’re here to guide you every step of the way.

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