BIC TIP #1149: How Many Closings for a New Build?
Your client wants to build a home. Exciting! Now comes the practical question: how many closings will it take? Stephen Long, wearing his Notorious MLO hat, explains that there is more than one way to finance new construction, and the option your client chooses can affect how many times they sit at the closing table and how many fees they pay. One option worth asking about is the one-time close.
The Two-Closing Route
One common approach is to handle the land and the build separately. The client buys the land and has a closing. Then they get a loan for the construction. That means two different loans and two different closings.
It works, but it can come with redundancy. Each closing may carry its own costs.
The One-Time Close
Some lenders offer a product that rolls everything into a single transaction. With a one-time close, the land and the build are handled in one closing.
The appeal is simple. Instead of paying for multiple closings, multiple origination fees, and multiple attorney fees, the client gets it done once and can save some of those redundant costs. It can also simplify the process for everyone involved.
Where the Broker Fits In
Brokers do not choose the loan, but they can make sure clients know their options. When a buyer is shopping for land with plans to build, or talking with a builder about a custom home, it is a great time to suggest a conversation with a lender about construction financing.
Not every lender offers a one-time close, and terms and requirements vary. A knowledgeable lender can explain which path fits the client’s situation.
The Practical Takeaway
Financing a new build can involve two closings or just one. A one-time close combines the land and construction into a single closing, potentially saving duplicate origination and attorney fees. When your clients get ready to build, make sure they ask their lender about the one-time close so they know every option available to them.
