Originating & Underwriting

Construction Products

Convert interim financing for new construction to a long-term mortgage

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.

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.