Learn More About a One-Time Close Construction Loan in Texas
April 5, 2023
All across the Texas Gulf Coast region, a growing number of people are choosing to construct new homes on beautiful plots of land rather than buying pre-existing homes.
Whether you want a custom-built dream home as your primary residence, a new investment property, or a second home for vacations and weekend getaways, you’ll need reliable financing solutions to pay for home construction.
One of the best personal financing options is a one-time close construction loan Texas borrowers can tap into. Learn how this loan program works, the potential financial benefits it offers borrowers, and Texas Gulf Bank’s application process.
The Basics of a One-Time Close (OTC) Construction Loan
If you plan to build a new home from the ground up, you’ll need financial resources to cover all phases of the construction period, as well as a mini-permanent mortgage*. Instead of having a separate construction loan for building costs, as well as a separate mini-permanent mortgage loan after the home is built, an OTC construction loan handles all financing with one single loan.
*NOTE: Some creditors may offer one-time-close construction loans that include a permanent mortgage, but Texas Gulf Bank’s one-time close construction loans only include a mini-permanent mortgage.
With an OTC construction loan, you should have the funding needed to cover the entire construction phase, and when the home is complete, the construction loan will convert to a mini-permanent mortgage loan. This loan program has just one loan application and one closing, simplifying the process for borrowers and lenders.
There are two types of OTC loan structures available through Texas Gulf Bank: loans for primary residence construction and loans for investment property/second home construction.
Primary Residence Construction
For OTC construction loans to build a primary residence, approved borrowers receive construction financing, during which time they make interest-only payments on the advanced amount. When construction is complete, the construction loan automatically rolls into a mini-permanent mortgage.
Investment Property Construction
If you plan to build an investment property or second home, the process for an OTC construction loan is similar to primary residence loans but with one key difference related to the length of the mini-permanent financing.
Construction financing is in place through the construction phase and then when the house is built, the property converts to a second home loan structure that typically has a shorter amortization schedule than a primary residential mini-permanent mortgage loan.
OTC Construction Loans Provide Important Benefits
Choosing an OTC construction loan has several distinct benefits, whether you need financing for a primary residence or a second home/investment property.
The most significant benefit this loan program offers is potential substantial cost savings because borrowers only have to complete one loan closing process. An OTC construction loan allows you to simply pay once for closing expenses such as:
- Property appraisals
- Attorney fees
- Credit reporting fees
- Title search costs
- Land survey fees
By avoiding a second loan closing process, you can choose to apply those savings to other expenses or toward loan repayment.
Borrowers that choose an OTC construction loan may also enjoy other key benefits, including the following:
- Responsible for making interest-only payments on your loan during the construction phase, potentially providing significant cash-flow relief while your home is being constructed.
- A locked-in loan approval may avoid last-minute surprises. This way, you will have peace of mind that your mini-permanent mortgage is ready to go.
- A streamlined closing that could simplify your entire home construction and mortgage process. By only having one closing, you only have to complete one set of paperwork, which may save time.
- Ability to include lot financing in the construction loan so that the eventual construction to mini-permanent mortgage includes the land cost. This step ensures that all financing is in place before you break ground and begin constructing your home.
- Potential loan extension options during the construction phase if more time is needed for home construction. This is especially helpful if there are construction delays regarding supply chain issues, labor shortages, permit delays, or adverse weather conditions.
Choosing OTC construction loans for your home building needs can be an effective way to save valuable time, money, and resources.
The Application Process for OTC Construction Loans
If you are interested in applying for an OTC construction loan through Texas Gulf Bank, we recommend an initial assessment with one of our local loan officers. Our lender will discuss loan qualifications before buying land or beginning construction and help answer specific questions about your situation.
All potential borrowers will need to complete a loan application form and provide financial documentation including, but not limited to:
- 3 years of Personal tax returns
- Personal financial statement
- Outstanding debts
- Construction budget
- Building plans
- Construction timeline
- Land survey
Once all documentation is submitted, one of our loan officers will walk you through the qualification process. If approved, your OTC construction loan funding will be processed so you can complete the land purchase and break ground on new home construction.
One-Time Close Construction Loan In Texas: Work With Our Bank
Texas Gulf Bank has over 100 years of experience serving residents in the Gulf Coast region with effective financing solutions and services. We strive to always provide exceptional customer service, offer strategic lending solutions, and help strengthen our local community.
– If you want to buy land and construct a beautiful new home with the support of an OTC loan, Texas Gulf Bank can help! Visit with one of our lenders to discuss your home construction goals and learn more about applying for a loan. Or, drop us a note in the contact form to connect with us about a one-time close construction loan Texas residents should consider.
– If you want to learn more about your options for personal banking products and services from Texas Gulf Bank, subscribe to our email newsletter. You’ll receive banking news and regular updates about personal lending options directly in your inbox!
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