A construction-to-permanent ("C2P" or "single-close") loan combines your construction financing and your permanent mortgage into one loan with one closing. During the build you draw funds in stages and pay interest only on what’s drawn; when the home is finished, the loan automatically converts to a standard mortgage — no second closing, no requalifying. It saves the closing costs and rate risk of a two-loan ("two-time close") approach.
Single-close vs. two-time close
There are two ways to finance new construction. A two-time close uses a short-term construction loan, then a separate refinance into a permanent mortgage — two closings, two sets of costs, and the risk that rates or your finances change before you convert. A construction-to-permanent (single-close) loan locks it all in once: you close a single time up front, and it becomes your mortgage when the home is done. For most California borrowers, single-close is cheaper and less risky.
How the draw schedule works
You don’t get the full loan on day one. The lender releases money in draws tied to construction milestones (foundation, framing, drywall, final), each verified by an inspection. During construction you make interest-only payments on the balance drawn so far — so early payments are small and grow as the build progresses. When construction ends and the certificate of occupancy is issued, the loan converts to principal-and-interest.
Rates, down payment & requirements
Construction-to-permanent rates typically run a bit above a standard purchase loan because of the added risk during the build. Expect roughly:
- Down payment: often 10–20% (of total cost or appraised completed value)
- Credit: 680+ is common for the best pricing
- Documentation: builder contract, plans/specs, budget, and builder approval
- Term: 12-month build window is typical, then a 15- or 30-year permanent
Because guidelines vary widely lender to lender, this is a program where a broker who shops multiple construction lenders matters — see our construction loan program and new construction vs. existing home guide.
Bottom line: If you’re building in California, a single-close construction-to-permanent loan usually beats juggling two loans — one closing, interest-only during the build, and it becomes your mortgage automatically. Get pre-approved and we’ll shop construction lenders for you.
Frequently asked questions
What is a construction-to-permanent loan?
A single loan that finances your home’s construction and then converts into your permanent mortgage with one closing. You pay interest only on drawn funds during the build, then principal and interest once it’s complete.
How is a construction-to-permanent loan different from a construction loan?
A stand-alone construction loan is short-term and must be refinanced into a mortgage separately (two closings). A construction-to-permanent loan does both in one closing, saving costs and removing the risk of requalifying later.
What down payment do I need for a construction-to-permanent loan in California?
Often 10–20%, based on total project cost or the completed appraised value. Stronger credit and reserves can lower it. Requirements vary by lender, which is why shopping matters.
Do I make payments during construction?
Yes — interest-only payments on the amount drawn so far. They start small and grow as more of the loan is disbursed, then convert to full principal-and-interest when the home is finished.
Save Financial, Inc. — NMLS #377740, DRE #01875766. Equal Housing Opportunity. Figures are illustrative for 2026 and not an offer of credit or a guarantee of rates or approval.