Construction Products
Fannie Mae supports the new construction market with two types of Construction-to-Permanent (C-to-P) financing: Single-Closing and Two-closing transactions.
These options can help lenders grow their business by closing the housing supply gap in the communities they serve. This financing option allows borrowers to design homes and build them to meet their needs.
New updates streamline construction lending solutions that boost supply
Enhancements to our single-closing financing solution extend the age of credit documents up to 18 months* and allow lenders to manage risk over a longer timeline, helping to increase access to homeownership and deliver:
- greater confidence for lenders that a loan will remain eligible for sale
- a better borrower experience through greater price certainty and not having to requalify for their loan
- increased flexibility and liquidity to support longer construction timelines
*Available when LTV/CLTV/HCLTV ratios do not exceed 95% and the loan casefile is underwritten through DU® and receives an Approve/Eligible recommendation.
LLPA Waiver Eligibility
Construction-to-Permanent loans for properties in High Needs Rural Regions or manufactured homes may be eligible for LLPA waivers under Duty to Serve. Learn more.
Single-Closing Transactions
Single-Closing C-to-P transactions allow lenders to underwrite and close on a home construction loan and permanent financing at the same time using one set of closing documents. This benefits borrowers because the transaction is:
- Affordable: Borrowers only pay for one closing where they can lock in their permanent interest rate. If the interest rate falls during construction, it can be updated when the loan converts to a mortgage.
- Convenient: Only one appointment is required to sign the closing paperwork for both the construction and mortgage loans.
- Flexible: C-to-P loans allow borrowers to create customized solutions at any scale, from site-built homes to manufactured homes.
Please Note: The lender is responsible for managing the disbursement of the loan proceeds to the home builder, contractor, or other authorized suppliers. The lender may use a third party for this function.
Two-Closing Transactions
When a customer comes to a lender with an existing home construction loan that they need to convert to a mortgage loan, lenders can use a two-closing loan to roll the existing loan into a permanent mortgage. The original construction financing can come from any lender. In this case, the borrower will have been through two-closings (one closing on the construction loan and the second closing on a mortgage).
This flexibility allows borrowers to shop for the best terms on their construction financing without having to commit to terms with their mortgage lender upfront.
Add an Accessory Dwelling Unit (ADU)
An ADU can be incorporated into your borrower’s home construction project and provide the opportunity to earn additional rental income or create additional living space.
