Personal Banking Article

Lending Series: What is a One-Time-Close Home Construction Loan?

Hom Construction

Home construction lending options in Houston

Thinking about building your dream home? You’re not alone. An estimated 1,452,500 housing units were completed in 2023 according to a new residential construction report jointly released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. This represents a 4.5% increase from the 2022 figure of 1,390,500. Texas accounts for 15% of U.S. Total Housing Units Authorized by State in 2023—more than any other state in the country.

The Houston metro (comprising Houston, The Woodlands, and Sugar Land) alone had more than 50,444 new housing units authorized in 2023, making Greater Houston one of the country’s leading regions for new construction loans.

Navigating the lending process when building a new home can be overwhelming, but it doesn’t have to be. As your local lender, Stellar Bank is committed to helping Houston homeowners understand one-time-close construction loans, demystify how construction loans work, and determine which financial products best align with your goals. Here are some of our most frequently asked questions about home building loans.

 

What is a one-time-close home construction loan?

A one-time-close loan, also known as a construction-to-permanent construction loan, is a type of financing that allows an individual homeowner to construct their proposed new homestead or weekend home by combining a construction loan and mortgage loan into a single loan.

What one-time-close products does Stellar Bank offer?

At Stellar Bank, we offer One-Time-Close Construction-to-Permanent loans*. The construction term is up to one year, and payments are interest only monthly during the construction period.

After construction is complete, you will remain with the full-term mortgage provided in the One-Time-Close ARM**. However, if you want to obtain a longer-term fixed-rate mortgage, Stellar Bank can look to refinance to a secondary fixed-rate mortgage.

How do home construction loans work and how do I qualify?

Construction-to-permanent loans work as a draw note that advances as work on the home progresses. With this type of loan, a general contractor must be used; the homeowner cannot act as their own contractor. By using a qualified contractor and financing the construction in phases, construction-to-permanent loans help ensure the homeowners have funds available for each stage of the construction process. You can get in touch with your Stellar Bank Mortgage lender for loan terms and qualifications, which will involve reviewing your application, credit report, and supporting documentation.

What are the benefits of a one-time-close construction loan to homeowners?

In addition to enabling homeowners to customize a home to their specific needs, preferences, and lifestyle, construction-to-permanent loans help simplify the financing process. For example, interest-only payments during construction help homeowners manage the initial costs of construction. Upon the completion of the project, the home construction loan converts into a mortgage loan. This seamless transition allows homeowners to avoid the hassle and additional costs of going through a second closing.

What are the construction loan interest rates?

Interest rates vary based on current market conditions. To get specific rates, you can always contact a Stellar Bank mortgage lending specialist.

 

With our personal lending expertise and full range of home lending solutions, you’ll be picking out paint swatches and ordering furniture in no time.

Questions about our construction loans? We’re excited to help you. Learn more about construction loan requirements and our easy digital application process by contacting a Stellar Bank lender today.

 

*Certain conditions may apply

**Adjustable-rate mortgages have an interest rate that is periodically adjusted based on an index that reflects the cost to the lender of borrowing on the credit markets. Most ARMs have an initial fixed-rate period; the periodic adjustments begin at the end of the fixed period. ARMs may have restrictions, or cap rates, on the amount of the first, periodic, and lifetime total changes in the interest rate.

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