Couple smiling at their Nevada home construction site.

A Guide to One-Time Close Loans in Nevada

Q: What is a one-time close construction loan?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: How does a one-time close loan offer more security than a two-time close loan?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: What are the typical down payment requirements for building a custom home?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: How is my builder paid during the construction project?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: What are the general financial requirements to qualify for a construction loan?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: How are unexpected costs and delays managed with a one-time close loan?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: What are the main benefits of using an FHA or VA one-time close loan?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

July 21, 2026

Specialized In Jumbo Loans, Investor Loans, DSCR Loans, Non-QM Financing, Commercial Mortgages, and Tax-Informed Lending Strategies

Published By

David Ghazaryan

Owner / Broker / Banker

Contact Me At

(702) 766-3744

NMLS 1486726

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TL;DR

A one-time close loan combines your construction and permanent mortgage into a single, streamlined transaction.
This loan type protects you from interest rate hikes and the risk of re-qualifying after construction.
Understand the process for down payments, builder draws, and handling delays in Reno and Sparks.

Building a custom home in the growing communities of Reno or Sparks is an exciting prospect, but navigating the financing can feel like a project in itself. Traditionally, builders and buyers juggled two separate loans: one for the construction phase and another for the permanent mortgage after the home was complete. This two-step process introduced risk, extra costs, and the potential for financing to fall through. The solution is a one-time close construction loan, also known as a construction-to-permanent loan. This innovative financing tool combines both lending phases into a single, seamless transaction, offering you security and simplicity from groundbreaking to move-in day.

One-Time Close vs. Two-Time Close Loans

Understanding the fundamental difference between these two financing paths is the first step in making an informed decision for your project in Nevada. The choice impacts your costs, interest rate risk, and overall stress level.

The One-Time Close Loan

You apply once and attend a single closing before any construction begins. At this closing, you secure the financing for the entire project, including the land purchase (if needed), construction costs, and your final, long-term mortgage.

Single Application & Underwriting: You go through the credit and income verification process just once.
One Set of Closing Costs: You pay for appraisal, title, and other fees a single time, saving thousands of dollars.
Locked-In Interest Rate: Your interest rate for the permanent mortgage is locked before the first shovel hits the dirt. This protects you from rising rates during the 9-12 month construction period.
Reduced Risk: You eliminate the risk of failing to qualify for a permanent mortgage after the home is built due to changes in your financial situation or stricter lending guidelines.

The Two-Time Close Loan

This is the traditional, more cumbersome method. You first get a short-term loan to cover the construction costs. Once the home is complete, you must apply for a brand-new, separate permanent mortgage to pay off the construction loan.

Two Applications & Two Closings: You must qualify twice and pay two full sets of closing costs.
Interest Rate Risk: You cannot lock the rate on your permanent mortgage until the home is built. If rates have increased over the construction period, your monthly payment will be higher than anticipated.
Qualification Risk: Your income, credit, or job status could change during construction, potentially preventing you from qualifying for the second loan. This could leave you in a difficult position where you cannot secure permanent financing for your newly built home.

For most homebuyers in Reno, the security and cost savings of a one-time close loan make it the superior option.

Down Payment Rules for Building in Reno

Unlike a standard home purchase, the down payment for a construction loan is calculated based on the total project cost. This figure includes the cost of the land, soft costs like permits and architectural plans, and the hard costs of labor and materials from your builder.

Architectural blueprints for a custom home construction loan

Here’s a breakdown of typical down payment requirements for a custom home project in the Reno area:

Conventional Loans: These generally require the largest down payment, often ranging from 10% to 20%. (The data, information, or policy mentioned here may vary over time.) For a total project cost of $900,000, you would need a down payment of $90,000 to $180,000.
FHA Loans: An FHA one-time close loan offers a significant advantage with a minimum down payment of just 3.5%. On that same $900,000 project, your required down payment would be $31,500. This makes building a home much more accessible.
VA Loans: For eligible veterans and active-duty service members, a VA one-time close loan is an unparalleled benefit. It often requires 0% down. You can finance the entire project cost without a down payment, a massive financial advantage.

If you already own the land where you plan to build, you can often use the equity in that land toward your down payment requirement.

Locking Your Interest Rate in Sparks

One of the most significant advantages of securing a one-time close loan for your new build in Sparks is the ability to lock in your interest rate before construction begins. In a volatile market, this provides critical financial protection.

When your loan closes, you lock in the permanent interest rate that will apply for the life of your mortgage, whether it's 15 or 30 years. During the construction phase, you typically make interest-only payments on the funds that have been disbursed to your builder. Once the home is complete, your loan automatically converts into a standard principal-and-interest mortgage at the rate you secured months earlier.

Custom home being built in Reno with a one-time close loan

This completely removes the uncertainty of a two-time close, where you're at the mercy of the market when construction finishes. A 1% increase in interest rates on an $800,000 mortgage could mean paying hundreds of dollars more each month for the next 30 years. The one-time close loan gives you cost certainty from day one.

How Your Builder Gets Paid: The Draw Process

Your lender doesn't give the entire loan amount to the builder at once. Instead, funds are disbursed in stages through a carefully managed system called a draw process. This process protects you and the lender by ensuring work is completed to standard before payment is made.

The process follows a pre-approved draw schedule that is agreed upon by you, the builder, and the lender before closing. It outlines specific construction milestones and the amount of money to be released at each stage.

Here's how it works:

Milestone Completion: The builder completes a scheduled phase, such as pouring the foundation or completing the roof framing.
Draw Request: The builder submits a draw request to the lender for the funds associated with that milestone.
Inspection: The lender sends a third-party inspector to the build site in Reno or Sparks to verify that the work is complete and meets quality standards.
Funds Released: Once the inspection is approved, the lender releases the funds directly to the builder.

This cycle repeats until the final draw is disbursed after the home is 100% complete and you've received the Certificate of Occupancy.

Credit and Financial Requirements

Because construction loans involve more risk for the lender, the qualification standards are generally stricter than for a standard mortgage on an existing home.

Credit Score: While requirements vary by loan type, you'll generally need a higher credit score. For conventional one-time close loans, lenders often look for a score of 680 or higher, with the best terms reserved for those above 720. FHA and VA loans offer more flexibility, potentially allowing scores as low as 620-640. (The data, information, or policy mentioned here may vary over time.)
Debt-to-Income (DTI) Ratio: Your DTI is a measure of your monthly debt payments against your gross monthly income. For construction loans, lenders typically want to see a DTI of 43% or lower. (The data, information, or policy mentioned here may vary over time.)
Cash Reserves: This is a critical component. Lenders need to see that you have sufficient liquid assets to handle unforeseen expenses and make payments during the build. It's common to be required to have 6 to 12 months of mortgage payments (including principal, interest, taxes, and insurance) in reserves after paying your down payment and closing costs. (The data, information, or policy mentioned here may vary over time.)

Using FHA and VA Construction Loans

Government-backed loans from the Federal Housing Administration (FHA) and Department of Veterans Affairs (VA) provide excellent one-time close options.

FHA One-Time Close Loan

This is a popular choice for buyers with less cash for a down payment.

Pros: Low 3.5% down payment and flexible credit guidelines.
Cons: You must pay a Mortgage Insurance Premium (MIP) for the life of the loan in most cases, and the loan amount cannot exceed FHA lending limits for Washoe County. (The data, information, or policy mentioned here may vary over time.)

VA One-Time Close Loan

This is an exclusive and powerful benefit for those who have served in the military.

Pros: Requires no down payment and no monthly mortgage insurance.
Cons: You must meet the VA's service eligibility requirements and pay a one-time VA Funding Fee, which can be financed into the loan.

Managing Delays and Cost Overruns

Even with the best builder and plans, construction projects can face delays or unexpected costs. A well-structured one-time close loan anticipates these issues.

Most construction loans require a contingency fund to be built into the loan amount. This fund, typically 5-10% of the total construction cost, is set aside to cover unexpected expenses. For a $600,000 build, a 10% contingency reserve would provide $60,000 to handle overruns without requiring you to pay out-of-pocket.

If you decide to make changes to the original plan, known as change orders, these must be documented and approved. The cost for these changes is typically paid from the contingency fund or directly by you. Your fixed interest rate is protected during normal construction delays, but it's crucial that your builder completes the project within the timeframe specified in your loan agreement, which is often 12 months. Building a custom home in Reno is a major undertaking. To ensure your financing is as solid as your foundation, discussing your project with a mortgage strategist who understands Nevada's construction loan landscape is a critical first step. Explore your options to find a loan that fits your blueprint.

Ready to lay the financial foundation for your dream home in Reno or Sparks? Understanding your financing options is the first step toward breaking ground with confidence. Apply now to see what you qualify for.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.