When preparing to invest in new construction and build your own property as a rental, there are two primary methods for investors who finance the construction. Most acquisitions require two different loans with two separate approvals. One loan for the construction and one for the permanent loan. Theone time close loan permanent loan is so-called because it replaces the construction note with a standard mortgage.

The source for a construction loan is primarily through a bank or some other financial entity that has the ability to monitor the construction process and disburse construction funds as work progresses. However, while most banks offer mortgages not all mortgage companies offer construction loans. A mortgage banker whose sole business model is to originate, approve and sell conventional home loans simply isn’t set up to track construction, gauge completion and assign interest to the note as funds are released. Yet there is one type of loan on the market that accomplishes both the construction and the permanent mortgage with just one closing. And it’s appropriately called a “one time close” loan.

The name describes the process. It’s a construction loan that disburses funds as with any other construction loan but it also includes a permanent mortgage once the construction has been completed. The advantage according to lenders who offer the program is that a one-time close loan only has one set of closing costs whereas two loans, a construction and a permanent require two separate closings therefore two sets of closing costs, saving the borrower money in additional fees.

That’s certainly the case with a one-time close loan but just because there are two closing doesn’t mean there are double the closing costs. Closing costs aren’t doubled but they are in fact reduced in certain areas, primarily lender and settlement fees. At first glance a one-time close loan seems like a “no brainer” but they do need to be compared with the standard one-two punch that traditional banks employ.