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Posted by Kari Montoya on Sep 29, 2022 12:00:00 PM

You’ve likely heard the terms one-close and two-close loans. Knowing the difference is an important part of the home-building process.

One-Close? Two-Close? What does it all mean?

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One-Close construction loan features a single interest rate, and that rate is typically offered on a longer-term adjustable rate mortgage—or a 30-year, fixed-interest mortgage. During a One-Close loan, the interest rate is set before construction and the permanent loan interest rate is also pre-determined. As the interest accrues during construction, customers will pay monthly interest payments as the balance increases. At home completion, the loan converts to your permanent loan.

When a borrower uses a Two-Close construction loan, the loan for the construction phase of the process may typically be offered as an adjustable-rate loan or line of credit. A fixed interest rate is offered for the second loan, which serves as the mortgage. A Two-Close loan carries two sets of closing costs as there are two mortgages. The first is a line of credit that finances the build, land costs, site development, and closing costs, which also require interest-only payments on the outstanding balance. 

The second loan (or the permanent loan) is a refinance of the construction loan that sets your permanent monthly mortgage payment which will include the principal, interest taxes, and insurance.

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The Pros and Cons of a One-Close Loan


  • The permanent Interest rate is predetermined and locked up front.
  • One set of closing costs
  • A streamlined process is efficient
  • One appraisal is used for value
  • There is a float down rate review at home completion
  • One loan qualification
  • No down payment options


  • Timelines for completion are restricted to 12 months
  • There could be costly extensions and/or the situation may require a refinance if build times extend
  • Limited mortgage terms available

The Pros and Cons of a Two-Close Loan


  • More flexibility with build timelines
  • Typically lower rates on the permanent mortgage
  • More loan programs to choose from
  • It is loan-to-value based, which could yield a $0 down payment


  • Two sets of closing costs
  • Rate is not locked until home completion
  • Must qualify for both loans


Which Loan is Right for Me? 

Those that choose a One-Close Loan may choose it for the peace of mind they’ll experience as they are able to lock in their interest rate upfront. They also may have an easily accessed property with existing utilities, making their forecasted build time fall comfortably within the timelines of the construction loan. If this sounds like you, speak with your mortgage professional to find out whether the One-Close Loan is the right path to take. 

Those that choose a Two-Close Loan typically have a more technical build and may have a property that requires more site preparation. Perhaps their jurisdictional turn-times are notoriously long, and could viably push the build out longer than expected. Other scenarios to consider involve the flexibility of locking in potentially lower permanent rates at completion and the wide variety of loan programs available with the second loan. Some customers have also experienced the finished home appraising for more than the initial appraisal, allowing for better terms on the second loan.

It is very important that you work with a Mortgage Professional to evaluate your finances according to loan program requirements. Sit down with an Adair Financial officer to find out exactly what you qualify for, and which program fits your goals best.


About Adair Homes

With 51-plus years in the industry, Adair’s long term commitment to treating each customer with honesty, integrity, and respect has paid off, 22,000 customers strong and counting. 

At Adair Homes, our mission states: it is our privilege to build our customers the home they have always dreamed of. We believe in providing the greatest value for our customer’s dollar and finding innovative ways to value engineer homes. We believe that we can offer an outstanding customer experience that is both enjoyable and rewarding—and offer this one-of-a-kind customer experience as the largest on-your-lot builder in the West. For more info, get in touch with us here or call 1-844-518-7072.


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