Construction-to-permanent loans in Texas

Construction-to-permanent financing can use one closing or two. A single-close transaction closes the construction and permanent financing together; the lender manages the construction disbursements and the loan later converts under its documents and program rules.

A two-close structure uses an interim construction loan first and a separately closed permanent mortgage after the work is complete. The permanent lender underwrites that second loan on its own terms.

One closing does not universally eliminate requalification, rate changes, extension charges, overruns, or additional fees. Compare the actual note, disclosures, draw agreement, builder contract, and conversion conditions.

Single-close versus two-close

Fannie Mae defines construction-to-permanent financing as either one closing or two. In an eligible single-close transaction, construction and permanent financing close together, the documents state the permanent terms, and the lender controls disbursements to the builder or other approved parties. Conversion follows completion and the program's documentation requirements.

In a two-close transaction, the first loan funds construction and the second loan provides permanent financing. Fannie Mae describes those as two separate closings with separate legal documents; the permanent lender may be different and must underwrite the borrower under the permanent mortgage terms.

That distinction is more useful than a generic promise of "one rate" or "one set of fees." Ask what can change, when requalification applies, how long the rate protection lasts, what happens after a delay, and which charges belong to each phase.

Key Details

Draws, payments, delays, and cost overruns

The lender or its construction administrator releases funds under an approved draw process. Program rules differ, but the file may require evidence such as third-party inspections, lien waivers, title updates, and confirmation that completed work supports the requested advance. The draw agreement should also explain change orders, retainage, contingency funds, and who approves a disbursement.

The CFPB explains that construction-phase payments are often estimated or based on amounts advanced and are commonly interest-only during that phase. That is not a universal payment rule. Read the note and disclosures for the interest method, payment start date, maximum payment, treatment of unused funds, and what happens when more money is drawn.

Timeline rules also vary. Fannie Mae's current single-close eligibility permits no individual construction period longer than 12 months and no total period longer than 18 months; different programs can use different limits. Confirm extension conditions, charges, rate treatment, and the consequences of missing the completion deadline.

Land, appraisal, and conversion

Already owning the lot does not produce one universal "equity credit." Under Fannie Mae's single-close framework, a transaction that acquires the lot is treated differently from one in which the borrower already holds title, and the loan-to-value calculation changes with that structure. The lender still applies its appraisal, title, contribution, and documentation rules.

Single-close does not mean requalification can never happen. Fannie Mae requires requalification at conversion in specified circumstances, including certain term changes, updated credit documents, or a decline in value that increases the loan-to-value ratio. The completion appraisal, certificate of occupancy, final title work, and lien clearance can also be conversion conditions.

Jumbo and physician custom-build files

A high-cost custom build should be modeled from the projected permanent balance backward. If the completed loan exceeds the applicable conforming limit, the permanent takeout may require jumbo underwriting. Construction and permanent lenders can use different standards for liquidity, reserves, income, appraisal review, cost overruns, and post-closing funds.

There is no single universal "physician construction loan." A lender-specific professional program may treat an employment contract, future start date, student debt, reserves, or occupancy differently. The Texas physician mortgage guide explains what to verify without promising that a construction feature is available.

The practical question is whether the construction terms and the expected permanent terms still work together after realistic overruns, delays, valuation changes, and income-document timing. That comparison belongs at the start of the project, not only when the house is nearly finished.

Where I fit in

I do not originate the interim construction loan or a single-close construction-to-permanent product. On a two-close build, I can analyze the future conventional or jumbo permanent mortgage and explain how the proposed construction structure could affect that later financing. That is permanent-financing planning, not an offer of construction credit.

If the project is a remodel rather than a ground-up build, compare the structure with the options discussed on the renovation loans page. Availability, qualification, terms, fees, draw administration, and extension rules remain lender- and program-specific.

Primary sources and limits

This guide uses the CFPB construction-loan overview, the CFPB's construction-loan disclosure guide, and Fannie Mae's current guidance for construction-to-permanent financing, single-closing transactions, and two-closing transactions.

FHA and USDA single-close programs have separate requirements; use the current FHA Single Family Housing Policy Handbook and USDA's Single Close Construction Program materials for those program-specific rules. This page is educational, not a quote or approval.