If you are considering building a house, you probably don’t like the idea of getting a construction loan that you’ll have to pay off with a permanent mortgage. And, you’ve probably thought of the risk you are incurring, if something happens and you can’t get permanent financing after construction is complete. The solution is to get a construction conversion mortgage.
A construction conversion mortgage finances the home construction, then converts to a regular home loan, avoiding the hassle of having two separate loans.
Other names used for a construction conversion mortgage include:
- Single-close construction to permanent loan.
- Construction conversion loan.
- Construction to perm loan.
- Single close loan.
- One time close loan.
- All in one loan.
What Is a Construction Conversion Mortgage?
Instead of securing a construction loan and then taking out a permanent mortgage after construction is complete, a construction conversion mortgage finances the construction and then converts to the permanent mortgage.
Although many financing companies have offered these types of loans over the years, they have become more popular through Fannie Mae, Freddie Mac, FHA, VA, and USDA.
What are the Benefits of a Construction Conversion Mortgage?
There are numerous benefits of building a home with a mortgage that finances the construction and then converts to a permanent mortgage.
Here are 6 benefits inspired by Land Gorilla:
- Qualify Once: Rather than qualifying for two separate loans, you qualify for a single loan, which saves time and eliminates a lot of work.
- Less Risk: Traditional construction financing opens you up to the risk of not qualifying for the permanent mortgage once the home is built, sometimes due to events out of your control. When you use a construction conversion mortgage, this risk is eliminated.
- No Surprises: When you build a home with a construction conversion mortgage, you know the interest rate for the construction period and the permanent mortgage, before construction starts. This is not the case if you have a separate construction loan and mortgage.
- Lower Closing Costs: A construction conversion mortgage allows you to build a new home with a mortgage that finances the construction and converts to the permanent mortgage; therefore, you save money by only paying closing costs one time.
- Easier Appraisals: A construction conversion mortgage typically requires a single appraisal before construction starts. But if you have two separate loans, one for the construction and another for the permanent mortgage, you will have two separate appraisals that may come in differently, and cause problems securing permanent financing.
- No Intervening Liens: If you build a home and it has an unsatisfied mechanics lien on it after construction is complete, it’s impossible to get a permanent mortgage as long as the lean remains. This problem is eliminated with a construction conversion mortgage, protecting the homeowner, because a mechanics lien would be in a 2nd lien position behind the construction conversion mortgage.
Marimark Mortgage
Marimark Mortgage serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in conventional home mortgages, FHA, VA, and USDA mortgage options, refinance loans, and reverse mortgages. We’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application, or contact us direct.

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