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The Lowdown on a New Construction...


One-Time Close New Construction


Priority 1 Lending offers One-Time Close New Construction for conventional and VA loans. This is an opportunity for our clients to generate new business as they continue to strengthen relationships with real estate agents, build new relationships with builders/contractors and further expand their portfolio of options for borrowers.


  • PRIORITY 1 LENDING is arming our partners to help more borrowers and first-time homebuyers make their first home or next home their dream home
  • Builders don't have to pay for the construction upfront, then sell the home to a borrower. They can create the borrower's dream home and get a loan before construction even begins. Helping save time and money by only having to close once and covering one set of closing costs!
  • PRIORITY 1 LENDING's process has a contractor approval component. Meaning we vet the contractor and obtain references to make sure they are credible. This helps give peace of mind to your borrower, that they have gone with a good option.
  • Other lenders require intense documentation, high interest rates, and large down payments. PRIORITY 1 LENDING helps reduce the headaches, keep the project moving, create transparency and peace of mind for all parties involved, and offer the same great service on these loans, as we always do
  • After the first approval the borrower is good to go, no need to reapprove them!

What is a One-Time Close New Construction loan?

  • A One-Time Close New Construction loan is a single closing construction loan. The construction portion is short-term financing that is modified into permanent financing upon completion of the project. A single closing construction mortgage can be closed as a purchase or a refinance.

What is a single closing? 

  • A single closing construction loan is the combination of financing of the construction and the permanent mortgage. There is a single closing transaction that occurs prior to construction beginning.
  • Closing costs/fees that the borrower is responsible for are collected at closing. Funds are accessed through draws and there will be an initial draw at closing for proceeds to the contractor to begin the construction project.


Loan is modified to permanent financing at time of project completion on every loan. The loan is converted to a fully amortizing loan and the loan term begins.

Borrowers will be required to sign the Modification Agreement.

  • The Final Inspection and Certificate of Occupancy is required before the Modification Agreement is signed by the borrower
    • If the Modification Agreement is not signed at 12 months, the Borrower is required to requalify
    • PRIORITY 1 LENDING will hold the final draw until the agreement is signed

NOTE: At time of modification, if the current available rates are lower borrowers will be offered a float down to a lower rate. If the current available rates have gone up, borrowers are protected against a rate increase.


    If the modification agreement is not signed by month 12, the following must be submitted for requalification:

    • New income, assets and credit documents
    • Disclosures do not need to be redisclosed unless the borrower is denied during requalification

    Loan will need to be resubmitted to refinance the One-Time Close New Construction loan

What is a One-Time Close New Construction Purchase Loan?

  • The loan purpose is a purchase when the borrower is not the current owner of the lot on which the home will be built. The borrower is using the loan funds to purchase both the lot and to fund the construction of the property. The loan amount includes the sum of the sales price of the lot and the cost to construct the property minus the down payment.

What is a One-Time Close New Construction Refinance Loan?

  • The loan purpose is a refinance when the borrower already owns the lot in which the home will be built on. The borrower is using the loan funds to pay off any existing liens on the lot and to finance the construction of the home. The loan amount includes the sum of the any existing financing from purchase of the lot and the cost to construct the home.


Construction Period  - time frame between the initial draw at closing to completion of the construction of the property

Initial Draw (Draw at Close)  - amount of funds to be disbursed at closing

  • On a purchase transaction, funds from initial draw are used to purchase the lot and to pay the contractor to begin the project
  • On a refinance transaction, funds may be used to pay off existing financing on the lot and to pay the contractor to begin the project

Draw Schedule  - outline of the increments in which funds will be disbursed to the contractor in accordance with the construction contract

  • Funds are generally released to complete a certain percentage of the project throughout the construction period
  • Before each draw is released, an inspection is done to ensure progress is being made on the construction, a title search is done to ensure there are no outstanding liens and that the correct permits are drawn
  • 10 business day turn time for release of the initial draw once it has been dispersed from PRIORITY 1 LENDING at closing
    • Business days are based on regular business hours of 8am EST - 8pm EST Monday-Friday

Construction Draw Fee  - cost collected at closing to draw funds during the construction period is based on the hard cost of construction

  • The fee is determined during the project approval period and will be finalized between Granite and the builder/contractor

Float Down  - when the locked interest rate changed to a lower rate available at time of project completion

  • If the borrower is eligible for a float down, the process is automatically complete


  • Fannie Mae only - DU Findings must be approve/eligible
  • Maximum Lock Period = 90 days
  • Project and builder/contractor must be approved by PRIORITY 1 LENDING/Granite
  • 5% of construction cost will be held for the contingency fund that is part of the project budget (Form C)
    • 10% of construction cost held in Texas
    • Included in the initial loan amount and is used in case the construction costs are underestimated
  • 11 month maximum build period with 1 month modification period
  • Credit documents cannot exceed 12 months at the time of modification
  • .75% rate adjustment applied at time of lock to the rate selected in EASE
  • $1495 underwriting fee
  • Only weather related escrow holdbacks permitted
  • Eligible for Hybrid Close with paper note
    Recast options are available once the build is complete and the loan is in the modification period


  • Texas 50(a)(6)
  • Co-ops, attached condos, manufactured homes and accessory dwelling units
  • Temporary Buydowns
  • Principal Reductions
  • Appraisal waivers or appraisal alternatives
  • Title Review And Closing (TRAC) process
  • Virtual Close
  • Ultimate Loan Submission
  • Borrower cannot be the builder
  • PRIORITY 1 LENDING Loan Shield


  • 15- and 30-year Fixed & 7/6 and 10/6 ARMs
  • Conforming and High Balance loan limits
  • Primary, second home and investment properties
  • Min FICO = 700
  • Max LTV/CLTV/HCLTV = 95%


  • 30-year Fixed & 30-year Jumbo
  • Primary Residence Only
  • Max Loan Amount = $4 million
    • Total loan amount cannot exceed the total acquisition cost, including financed funding fee
  • Min FICO = 580
  • Max LTV/CLTV/HCLTV = 100%
  • Funding fee based on total acquisition costs
  • Borrowers cannot combine VA entitlement
  • No rehab constructions - an existing property cannot be renovated using a One-Time Close New Construction loan


On VA One-Time Close New Construction refinance loans, the LTV calculation includes the lower of the acquisition cost or appraised value of the lot. The figures used depends on 1) if the lot was acquired within 12 months of closing, and 2) if the lot was gifted to the borrower.



If the borrower has made a down payment to the builder prior to the mortgage transaction occurring, borrower can receive cash back at closing for this amount


In all states except Texas, if the borrower purchased the lot in cash or made a down payment to the builder prior to the mortgage transaction occurring, borrower can receive cash back at closing for this amount.

  • Lot must be free of any liens and cannot have been gifted to the borrower
  • If the purchase of the lot was financed, but the lot has since been completely paid off, evidence that it is owned free and clear must be provided
  • Any down payment that is being reimbursed must be fully documented and funds sourced


  • Escrow Waiver required during construction period - no payments are required during the construction period as the interest only payments will be included in the construction budget
  • Once the construction period and the modification to permanent financing has been completed, the borrower will pay principal and interest payments
  • Loan term begins at note date
  • Construction period is "backed out" of the loan term
    • Example: A 30 year term loan with an 11 month build. At time of modification, the loan converts to a 29 year and 1 month permanent financing loan.