The Quick Read: Start before you sign a builder contract, and ideally before you pick the builder. That conversation decides which loan structure you use, whether the builder’s schedule fits the loan’s time limits, and how you will protect your rate during the build. No source gives an exact number of months, so the right moment is a sequence, not a date.
Key Takeaways
- A finished or spec home is a normal purchase mortgage. A to-be-built home needs a choice between one closing and two.
- The structure decides when your credit, income and appraisal get tested again.
- A standard rate lock is short. A build is long. Plan the lock on purpose.
- Builder credits cannot fund your down payment.
Why Timing Matters More on a New Build
Buying a finished house is simple. You apply, the home is appraised, and you close.
Conventional payment estimate
The starting figures are an example price at the first-time buyer’s minimum down payment. Replace them with yours.
Editable benchmark: 7.32% as of October 22, 2026 · Freddie Mac 30-year average via FRED®. A conventional market reference, not a conventional loan quote.
Estimate seeded at the low end of Fannie Mae’s published range (0.58%–1.86% a year); the insurer prices the actual premium on the score and the leverage. Applies only above 80% loan-to-value.
Illustrative starting assumptions: a $350,000 price, the first-time buyer’s minimum down payment, a thirty-year term at the current Freddie Mac benchmark, mortgage insurance at the low end of Fannie Mae’s published range, and property taxes and insurance estimated at typical national rates. Every field is editable.
Illustrative estimate only — not a Loan Estimate, approval, quote, or commitment to lend. The rate field carries the weekly Freddie Mac thirty-year conventional benchmark, a market reference and not a conventional loan quote; your rate is set by the lender at lock. The mortgage insurance figure is an editable estimate seeded from Fannie Mae’s published typical range, not a premium quote; the insurer prices the actual premium, and the cancellation month assumes scheduled payments with no extra principal and no change in value. Taxes, insurance and dues are editable estimates; closing costs are not included. Conforming loan limits apply by county. Licensed in sixteen states for consumer mortgages.
A to-be-built home stretches that process across months. Money goes out in stages. The permanent loan starts only after the house is done. So the choices you make before construction shape everything that follows.
Across the wholesale programs Lendmire places files with, the borrowers who run into trouble on a build rarely have a credit problem. They signed a contract first and asked about financing second. By then the builder’s timeline, the lock strategy and the loan structure were already set.
Here is the split that matters:
| Home type | Typical loan path | When to talk to a lender |
|---|---|---|
| Finished or spec home | Standard purchase mortgage | Before you make an offer |
| To-be-built, one closing | Construction loan converts to permanent | Before choosing the builder |
| To-be-built, two closings | Construction loan, then a separate permanent loan | Before buying land or signing |
Lendmire’s conventional loan programs cover the permanent side of all three paths.
What Are the Two Conventional Structures?
A to-be-built home uses one of two structures. One closing means a single set of documents and a single closing. Two closings means a construction loan first and a separate permanent mortgage later.
One closing. Fannie Mae calls this single-closing construction-to-permanent. The Fannie Mae Selling Guide says one closing covers both the construction financing and the permanent mortgage. The lender manages payments to the builder. When construction ends, the loan converts automatically.
Two closings. Fannie Mae’s guide describes two separate closings with two sets of documents. The first covers the construction financing and may include the lot. The second is the permanent loan after the work is done. A new note is required. The old one cannot simply be modified.
Freddie Mac uses different words. It calls the same ideas One-Time Close and Two-Time Close under its Construction to Permanent Mortgages product. Same concepts, different labels. If a lender uses one set of terms and a builder uses another, they are likely talking about the same thing.
How the Loan Is Underwritten, Step by Step
Here is the sequence in plain terms.
1. You choose the structure. In a one-closing loan, the permanent terms are set up front. The permanent rate is locked at closing, according to Fannie Mae’s single-closing product flyer. In a two-closing loan, you qualify again at the second closing, with fresh credit, income and an appraisal.
2. You document your file. The lender reviews credit, income, employment, assets and the purchase terms. Our wholesale programs start at a 620 decision score, and the automated finding governs most files, with a 50% total ratio ceiling. Those figures are subject to lender guidelines and full file review.
3. The home is appraised. The appraisal looks at what the finished home is expected to be worth. For a two-closing loan, a final appraisal of the completed property drives the loan-to-value ratio. That is the loan amount divided by the home’s value.
4. The rate lock is planned. A rate lock holds your rate between the offer and closing. The CFPB notes that locks are typically 30, 45 or 60 days, and sometimes longer. A new build takes far longer than that. So the lock needs a plan.
5. Construction happens. The lender pays the builder in draws as work is completed. Fannie Mae will not buy the loan until construction is done and the loan has converted.
6. The loan converts. In a one-closing loan, it converts to the permanent mortgage automatically. Per the Fannie Mae flyer, only the rate, loan amount, term, and an adjustable-to-fixed change may be modified at conversion.
7. You receive the Closing Disclosure. This final statement of terms must reach you at least three business days before closing.
The Time Limits That Can Break a One-Closing Loan
One-closing loans carry hard limits. Under Fannie Mae’s guide, no single construction period may exceed 12 months, and the total may not exceed 18 months. The guide states that exceptions to those limits will not be granted.
That matters when you choose a builder. A custom home with a long schedule may not fit. If the build might run past the guide’s construction-period limits, a two-closing structure is the path that guide points to.
So ask the builder for a realistic schedule before you commit. Then ask what happens if weather, permits or supply problems push it back. A builder with a loose estimate is a risk to your financing, not only to your move-in date.
Rate Locks and Long Builds
This is where many buyers get surprised.
A lock is a promise with conditions. The CFPB says a locked rate can still change if your application changes. Its examples include a different loan amount, credit score, verified income, loan type, down payment, or an appraisal that comes in differently.
Extensions are another issue. The CFPB warns that extending a lock may be expensive. A lock can also keep you from a lower rate if rates fall.
So you have a few basic tools:
- A one-closing structure, which sets the permanent rate at closing.
- An extended lock, which covers a longer window.
- A float-down option, which may allow a lower rate if the market improves.
Terms and costs differ by lender. Ask these questions before you sign:
- How long can the lock run, and what does an extension cost?
- Can the lender refuse to extend?
- Is a float-down available, and under what conditions?
- What happens to my rate if the build is delayed?
Fannie Mae’s flyer notes that if rates fall during construction, a borrower in a one-closing loan may be able to get a lower rate at conversion. That is a feature of the structure. It is not a promise.
Where the General Rule Breaks
The advice above holds for most files. These cases bend it.
You already own the lot. A one-closing loan is processed as a purchase or limited cash-out refinance. A two-closing loan is processed as a refinance, and cash-out treatment requires six months of legal title to the lot. How the lot’s equity counts toward your down payment depends on the file.
You are buying a condo or co-op. Fannie Mae’s eligibility rules do not allow attached condo units or co-op units under construction-to-permanent. Detached condo units may be allowed, subject to project review.
You are buying a manufactured home. Both agencies allow some construction-to-permanent options for manufactured homes, with conditions. Freddie Mac does not allow a cash-out Two-Time Close on one.
The builder offers incentives. The builder is an interested party in your purchase. Their credits cannot be used for your down payment, your reserves or your minimum borrower contribution, according to Fannie Mae’s interested party contribution rules. Limits on other concessions vary by loan-to-value and occupancy. Also ask whether the builder’s preferred lender is affiliated with the builder. Special treatment can apply to incentives in that case. Lendmire’s piece How Much a Seller Concession Saves on a New Construction Conventional Loan goes deeper on this.
Freddie Mac updated its product. Freddie Mac announced changes to construction-to-permanent mortgages in Bulletin 2026-1. One attachment describes a first-time-buyer Home Possible variant tied to income limits. Read the bulletin itself, and ask your loan officer how it applies to your file.
Your plan is a second home or rental. Occupancy decides leverage. Our parameters allow up to 90% LTV on a second home. A primary residence can reach 95%, or 97% for a qualifying first-time buyer with a fixed rate. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
What Leverage Looks Like on a Purchase
For a one-unit primary residence on a standard purchase, our programs allow 95% loan-to-value, which means 5% down. A first-time buyer with a fixed rate may reach 97%, or 3% down. A first-time buyer here means someone with no ownership interest in a residence in the previous three years. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Mortgage insurance is required above 80% loan-to-value. You can request cancellation at 80% of the original value with good payment history, no second liens and no drop in value. The servicer must end it automatically at 78%. These are program mechanics, subject to lender guidelines and full file review. They are not a commitment to lend.
Construction adds one wrinkle. The appraisal that sets your value can arrive late in the process. If it comes in low, your loan-to-value ratio changes and so does the cash you need at closing.
Protect Your File During the Build
Document age is a quiet risk. Credit, income and employment documents have to be current when the loan converts. If the build drags on, you may need to update them.
That makes the months of construction part of your underwriting. A few habits help:
- Do not open new credit cards or finance a car.
- Do not change jobs without talking to your loan officer first.
- Do not move large sums between accounts without a paper trail.
- Keep copies of every document you submit.
A job or credit change matters most in a two-closing loan, because you are underwritten again at the second closing. A one-closing loan is not immune, though. Conversion still requires current documents.
A Walk-Through: Starting at the Right Time
Picture a couple who plans to build on a lot they have not bought yet. They have a rough budget and a shortlist of two builders.
They talk to a loan officer before they pick a builder. The loan officer asks each builder for a realistic schedule. One builder’s schedule fits comfortably inside the 12-month limit. The other’s does not. That alone narrows their choice.
They then decide between one closing and two. Because they want the permanent terms set early, they lean toward a single closing. They ask about lock length, extension terms and what happens if the build slips. They gather their income and credit documents and agree to keep their finances steady.
Only then do they sign the builder’s contract. The contract and the loan now fit together. Compare that with signing first and discovering the schedule breaks the loan’s time limit.
Key Terms Defined
Construction-to-permanent loan: A loan that finances the build, then becomes the long-term mortgage once the home is done.
One closing (single-closing): A structure where one set of documents covers both the construction phase and the permanent mortgage.
Two closings: A structure with a construction loan first and a separate permanent mortgage after the home is finished.
Draw: A payment from the lender to the builder as work is completed.
Rate lock: An agreement that holds your interest rate for a set period, as long as your application stays the same.
Interested party contribution: Money the builder or another party with a stake in the sale puts toward your costs. Limits apply.
Loan-to-value (LTV): The loan amount as a percentage of the home’s appraised value or price.
Frequently Asked Questions
When should I talk to a lender about a new construction loan?
Before you sign a builder contract, and ideally before you choose the builder. That timing lets you pick the structure, check that the builder’s schedule fits the loan’s limits, and plan your rate lock. No official source sets an exact number of months. This guidance comes from how the rules fit together.
Do I need a different loan for a spec or finished home?
Usually not. A finished or spec home generally uses a standard purchase mortgage. The one-closing versus two-closing decision applies to homes that are built after you commit. Our piece Does New Construction Need a Full Appraisal on a Conventional Loan? covers how the value check works.
Can I use a builder’s credit toward my down payment?
No. Fannie Mae’s rules bar builder contributions from counting toward the down payment, reserves or minimum borrower contribution. Credits may still help with some closing costs, within limits that vary by loan-to-value and occupancy.
Does one closing mean I do not have to qualify again?
Not entirely. A one-closing loan sets the permanent terms up front, but current income, employment and credit documents are still needed when the loan converts. Whether older documents can be used depends on the lender’s requirements. Ask early.
What if my build runs longer than expected?
Delays can mean a lock extension, and the CFPB warns that extensions may be expensive. For a one-closing loan under Fannie Mae’s rules, the 12-month and 18-month limits are firm. A longer build may need to be structured as two closings from the start.
Next Steps
If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file. A good first step is a short conversation before you commit to a builder or a lot.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps homeowners and home buyers in 16 states with FHA, VA, conventional and jumbo purchase and refinance loans arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B5-3.1-02, single-closing transactions
2. Fannie Mae Selling Guide B5-3.1-03, two-closing transactions
3. Fannie Mae single-closing construction-to-permanent product flyer
4. CFPB
5. Fannie Mae Selling Guide B3-4.1-02, interested party contributions
6. Freddie Mac Bulletin 2026-1
This article is part of Lendmire’s conventional loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can an Unemployed Person Get a Conventional Loan? · Conventional Loan Pre-Approval Requirements for New Construction · Conventional Loan PMI Rules for Buyers Putting Less Down
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.