The one-time close loan, seen from the builder's side of the table.
When your buyer uses a one-time close construction loan, you are paid in draws as the work is completed and inspected. This guide walks builders and general contractors through each step of the process, from builder registration to the final draw, so there are fewer surprises for you and your buyer.
Short answer: the buyer closes once before construction starts, the construction funds are held, and the builder is paid in stages as work is completed and inspected.
At closing, the lot is purchased or paid off and the rest of the loan is set aside for construction. As each stage of work is finished, the builder requests a draw, an inspector confirms the work in place, and funds are released. When the home is complete and the final documents are in, the last draw is released and the loan converts to the buyer's permanent mortgage without requalifying. The buyer-side view is on the one-time close page.
Short answer: builder registration is a documentation review for program eligibility, and it is commonly completed once, then reused for later projects while your license and insurance stay current.
The review commonly covers your contractor license, general liability insurance (commonly at least $1 million per occurrence), workers' compensation where required, business and financial information, experience building new homes (commonly 3 or more years), and references. For VA loans you also need a VA builder ID. Use the Builder Registration Checklist to gather everything in one pass, and read the full builder registration guide.
Builder registration is a documentation review for program eligibility. It is not an endorsement, recommendation, or guarantee of any builder's work.
Short answer: a fixed-price, turnkey contract between you and the buyer, with you acting as the general contractor.
The contract price must fit the buyer's loan amount and program limits, so it helps to review price and buyer qualification early.
Short answer: on FHA and VA one-time close loans, in most cases the builder pays the interim interest on drawn funds, and that cost is built into the contract price, so the buyer usually makes no mortgage payments during construction.
Build interim interest into your pricing from the start rather than absorbing it. The amount depends on the loan size, rate, draw timing, and how long the build takes, which is one more reason a realistic schedule matters. On USDA one-time close, a payment reserve is commonly funded at closing instead. On conventional one-time close, the borrower commonly pays interest-only on drawn funds, and an interest reserve may be funded from lot equity case by case.
Short answer: site-built homes commonly have about 5 draws, and up to about 90 percent of the construction funds may be released before the final draw. Manufactured homes commonly have about 3 draws.
| Hypothetical site-built draw | Commonly tied to |
|---|---|
| Draw 1 | Foundation complete |
| Draw 2 | Framing, roof, and dry-in |
| Draw 3 | Rough mechanicals and insulation |
| Draw 4 | Drywall, interior finishes, and exterior |
| Final draw | Completion, final inspection, and completion documents |
Educational illustration only. Not an actual client, loan offer, or commitment to lend.
The actual schedule depends on the program and the approved draw schedule for the file. Draws pay for work in place only. Materials stored off site are not advanced. Permits and plans are commonly required before the first draw. More detail: construction loan draw process.
Short answer: builder's risk insurance on the project during construction, plus your general liability and workers' compensation coverage.
Builder's risk covers the structure while it is being built. Certificates need to be current at closing and stay in force through completion. The buyer's homeowners insurance takes over as the home is completed. An expired certificate can hold up a closing or a draw, so set a reminder for renewal dates.
Short answer: change orders that raise the price are generally paid by the borrower out of pocket, because the loan amount cannot increase after closing.
Document every change in writing, signed by the buyer, with the price and schedule impact. A change that alters the home materially may need review before the work is done. The best defense is a complete contract and a realistic contingency line up front. See construction loan cost overruns.
Short answer: lien waivers are signed releases confirming that the builder, subcontractors, and suppliers have been paid for the work covered by a draw, and they are commonly required with draw requests and at completion.
Collect waivers from subs and suppliers as you pay them, not at the end. Missing waivers are a common reason a draw, especially the final draw, is delayed. Use the lien waiver forms required by your state, since rules differ between states such as California and New Jersey.
Short answer: the final draw is commonly released after the home passes final inspection and the completion documents are received.
Once the final draw is paid, the loan converts to the buyer's permanent mortgage. The buyer signs a modification at conversion and does not requalify.
Short answer: on government one-time close, construction commonly needs to be completed within about 9 months of closing, with up to 12 months considered case by case. Conventional one-time close commonly offers 6, 9, or 12-month terms.
Schedule with a cushion for weather, inspections, and utility hookups. A build that runs past the allowed period can create added costs for the buyer and for you.
Where available: PRMG programs are available in every state where PRMG is licensed, which is all states except New York, including California and New Jersey, subject to eligibility and program guidelines. In California, permits are typically required before a one-time close loan closes.
Answered by Ken Clark Jr., Certified Mortgage Advisor. Program availability and requirements vary and are subject to change.
Through draws released after each stage of work is completed and inspected, commonly about 5 draws on a site-built home.
Up to about 90 percent of construction funds may be released before the final draw on site-built homes, depending on the program.
Construction funds are commonly released for work in place, not as advances. Discuss your draw schedule before closing so expectations are clear.
In most cases the builder pays the interim interest, and it is built into the contract price.
Commonly no. Registration is typically completed once and reused while your documents stay current.
Generally no. One-time close programs commonly require a fixed-price, turnkey contract.
The borrower generally pays for change orders that increase the price, because the loan amount cannot increase after closing.
No. Draws pay for work in place, not materials stored off site.
Builder's risk on the project, general liability (commonly at least $1 million), and workers' compensation where required.
Commonly a certificate of occupancy, final inspection, appraiser's completion report, and final lien waivers.
Yes, for VA construction loans. It is separate from lender builder registration.
Guidelines change. Verify current program requirements with Ken Clark Jr. before relying on them for a transaction.
Disclaimer: This content is for educational purposes only and is not a commitment to lend, a guarantee of approval, or a rate quote. Loan programs, down payment requirements, terms, and eligibility depend on borrower, property, project, builder, and program qualifications, are subject to underwriting, and vary by state. Not all applicants or projects will qualify. Builder registration is a documentation review for program eligibility and is not an endorsement of any builder. Equal Housing Opportunity. Paramount Residential Mortgage Group, Inc. (PRMG), NMLS #75243. Ken Clark Jr., NMLS #225375. PRMG is licensed in 49 states, excluding New York.
Certified Mortgage Advisor and Branch Manager at PRMG Mortgage (NMLS #75243). 28 years in mortgage lending. Specializes in FHA, VA, conventional, DPA, jumbo, Non-QM, renovation, and construction financing for buyers and investors in Sacramento, New Jersey, and nationwide. PRMG is licensed in 49 states, excluding New York. Three-time Gold Award winner for Highly Reviewed Mortgage Team in Sacramento (2023, 2024, 2025). NMLS #225375.
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