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One-Time Close Loans: Empowering Homeowners Who Are Building and Renovating in a Changing Market

Line of homes that are currently under construction


With today's unprecedented economic environment, the way people build, buy, and sell homes is changing. At New American Funding (NAF), we know that rising construction costs and labor shortages are creating a demand for new, more flexible solutions than ever before. That's why our One-Time Close loans and other unique products are designed to help people overcome the challenges of building and renovating homes in the current market. In this article, Alicia Norwood, our VP of Renovation and Construction Lending, shares how NAF is making homeownership more accessible by offering products that ease financial burdens and simplify the building process. Read on to learn more about how NAF is turning the dream of building or renovating a home into a reality.


What is a One-Time Close Loan?

A One-Time Close loan simplifies the financing process by combining the construction and permanent mortgage into a single loan. This means that borrowers only need to qualify once and attend one closing session. This simplified process reduces the complexity, paperwork, and fees typically associated with traditional construction loans. The streamlined approach saves time and money. It also provides peace of mind as the interest rate can be locked in before construction begins, protecting against potential rate increases.


Simplifying Construction Financing with One-Time Close Loans



Alicia Norwood, VP of Renovation and Construction Lending at NAF, shares her insights into the One-Time Close loan and highlights the many benefits it brings, including efficiency and cost savings. “The One-Time construction loan is really a super beneficial loan. It eliminates the need for duplicate closing costs associated with the traditional two-time close,” said Norwood. “Traditionally, borrowers have to close twice—once for the initial construction loan and again for the permanent loan. With our One-Time Close loan, you close once, which means less money out of pocket for the borrower and less time and effort on the part of the borrower.”


Benefits for Builders and Homeowners

The loan structure benefits the homebuyer and significantly helps the builder, especially in today’s market . “Builders can start construction without bearing all the upfront costs, as initial disbursements are available after the loan closes. Also, being paid as work is completed, and not having to carry the majority of the construction costs until the home is completed”, said Alicia. This structure also incentivizes the builder to get the work done faster so the homebuyer can move in sooner.


Enhanced Flexibility and Accessibility


Info graphic comparing One-Time Close loans and Traditional Close loans


One-Time Close loans are a game-changer, offering unprecedented flexibility. This is especially valuable for first-time homebuyers who are often faced with a rigid financial landscape. "We offer max financing on our programs where a lot of lenders, a lot of bigger banks, require 20% down... We offer Conventional, FHA, and VA, and we go up to max financing, so they can do 3 1/2% down on an FHA, 5% down on Conventional.

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Managing Rising Construction Costs

With costs for construction on the rise, increasing on average 4% over the last year and continuing to rise in 2024, Alicia says that these loans are a game changer for new homebuyers just learning about them because they allow for some financial relief. She said, “But what really helps is the way the loan is set up. You’re able to finance the lot and build into the loan and include contingency funds as well.” This way, builders can better manage their resources without the pressure of covering all costs upfront, which is a win for everyone.


Long-Term Financial Benefits

The financial benefits don't stop there. "You're only paying the interest on the outstanding balance during construction, then once the home is completed, you'll roll in to your full principal, interest, taxes, and insurance (PITI) payment," Alicia explains. This approach can help you easily manage your budget and feel more secure with your payments.


Customized Solutions and Upcoming Innovations

Looking to the future, Alicia points to the introduction of new programs such as the USDA One-Time Close, which will offer 100% financing under standard USDA guidelines. "We're also thrilled about our renovation can buy an older home and use the renovation product to make it your dream home," she says, responding to the needs of buyers in a low-inventory housing market.


How to Apply for a One-Time Close Loan

As the housing market continues to change, NAF's innovative financing solutions, like the One-Time Close loans, are making building and buying more accessible. "NAF has some really competitive products...we really give the borrowers opportunities to utilize max financing as long as they qualify," says Alicia. These products not only simplify the building and buying process but also open up new possibilities for managing costs effectively. With these resources, potential homebuyers can navigate the challenges of the market and take control of their homeownership journey.

Prospective homebuyers should meet with a Loan Officer at NAF to determine loan eligibility and discuss the various loan options and requirements. The first step is to provide the Loan Officers with a picture of your financial status, including income, credit, and other information. The NAF team will assist you every step of the way, from the initial application to closing on the property, to make sure you have a smooth and successful experience.


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