A construction-to-permanent loan, also called a single-close loan, is a special loan used to finance the cost of buying land, building a home on it, and later serving as the mortgage on the home once it’s finished being built. This kind of loan is ideal for borrowers who want to build a custom home from scratch on a chosen lot using contractors they pick.

Normally, you’d need two separate loans for these purposes: a construction loan to buy the land and build a home on it, and a separate mortgage loan to finance the finished home. A construction-to-permanent loan accomplishes both goals. Loan funds are used to pay for the lot and building costs and once construction is completed, the loan converts to a fixed-rate permanent mortgage loan with a term of 15 to 30 years — whichever you choose.