It’s easy to get tunnel vision when you’re building a new home and it’s nearing completion. You can practically feel that beautiful wooden banister and picture your shoe collection in that marvelous walk-in closet. These visions keep you going when your home is being built, but before you pack up those shoes, you want to make sure you understand the loan process, especially how your permanent loan finalizes. 

APM offers both one-time close and two-time close construction loan options, allowing homebuyers to choose the structure that best fits their goals, timeline, and comfort level with market conditions.

With a two-time close construction loan, the first loan covers the cost of the land, building materials, labor, and required permits. Because this loan funds the construction phase, it is always a good idea to get pre-approved early to better understand your budget and borrowing power. APM Loan Advisors can help guide you through this process.

During construction, which typically takes 12 to 18 months, payments are usually interest-only and based on the funds that have been drawn. Construction loans function similarly to a line of credit, releasing funds in a series of draws as specific phases of the build are completed. Interest is calculated only on the amount used, and payments can often be made monthly or structured into the loan.

As construction nears completion, permanent financing becomes the focus. With a two-time close, you will qualify for your permanent mortgage toward the end of the build, typically 45 to 60 days before completion. With a one-time close, your permanent financing is already approved upfront, and the final steps are focused on inspections and receiving the certificate of occupancy.

Your APM Loan Advisor will help coordinate each stage of the process, ensuring a smooth transition from construction to long-term homeownership, regardless of which construction loan option you choose.

Collecting Documents and Credit Check

First, we’ll collect updated versions of the documents we collected when we did your construction loan. This will include bank statements and pay stubs, as well as any life, income, or employment changes. There may also be additional documentation that we ask for at this time.

You’ll want to keep your credit score high during the construction process and avoid any credit pitfalls. We’ll need to run a new credit report as part of the permanent financing application process.

Appraisal

A new appraisal isn’t always necessary, but it can be beneficial during a two-time closing. That’s because you might be able to adjust your permanent loan based on this appraisal. If your appraisal comes back higher than the original value, you can use the new appraisal value to adjust your loan amount. Both VA and conventional loans allow for cash-out refinancing, so you might even be able to tap your equity at this time. Your APM Loan Advisor will be happy to discuss these options with you to see if this is the right strategy for your situation.

Approving Your Loan

Once we’ve got your final appraisal, your loan will go through our underwriting department for final approval. You have a few options for your permanent mortgage, which will have been discussed when you applied for your construction loan. These include FHA, conventional, and VA loans. Each has its own advantages, as your APM Loan Advisor will have laid out. They’ll also review everything to ensure that what you thought you wanted back when you started still works for you.

In a way, this final loan is like a typical refinance, meaning that you’ll start paying your loan off like any other permanent mortgage. You can choose from 30-, 20-, 15-, and 10-year fixed-rate financing. 

Many borrowers choose to secure a specific program and lock their loan rate before construction even begins. These long-term locks can bring peace of mind, knowing you won’t have to pay a higher rate once construction is completed. And don’t worry—your loan officer will go over any changes in the market and discuss whether you want to keep the locked rate or select a new one if interest rates go down. We’ve got you covered!

Closing

Our goal is to have your final closing right after your final inspection, but the process can vary based on the builder and local requirements. You’ll need to be ready to pay your closing costs and sign the final paperwork. This will likely happen at a title company, so be sure you bring an up-to-date proof of identity with you, like your driver’s license or passport.

Certificate of Occupancy

This is one of the last pieces that comes into play when a home is being built. Ironically, in many cases, this isn’t even a physical certificate! It simply means your local government approved your home for occupancy and the home follows all the required building codes. Just because it isn’t a physical document doesn’t mean it isn’t important, however. You need the certificate of occupancy to legally move in once construction is complete, which means we need it before we can fund your loan!

Move In!

Once your loan is finalized, funding typically occurs the day after signing unless a different timeline is needed. From there, it is time to move into your new home and begin the next chapter of homeownership. At this stage, your loan transitions to a traditional mortgage, with monthly principal and interest payments beginning as outlined in your loan terms.

At APM, we work to make the construction loan process as streamlined and straightforward as possible from start to finish. If questions come up along the way, your APM Loan Advisor is always available to explain each step and provide guidance tailored to your situation.

To learn more about the full construction loan journey, explore our Construction 101 resources and connect with an APM Loan Advisor when you are ready to get started.

Part of a recent executive order from President Trump that calls for potential changes to the qualified mortgage definition and its safe harbor could increase competition for certain types of loans, depending on how and if it progresses.

Processing Content

Changes that the broader mortgage credit order calls for include having the Consumer Financial Protection Bureau look into “tailoring” the ability-to-repay rule and QM for “smaller banks.” It goes on to parenthetically suggest this could include a broader safe harbor for portfolio loans.

The order additionally calls for exempting or modifying “small-mortgage loans” from qualified mortgage points-and-fees limits, and removing “unnecessary and burdensome elements” from ATR and QM underwriting requirements for banks.

Some experts’ analysis of what this could mean follow:

New breaks for small mortgages

Expanding the QM points-and-fees limit for small-mortgage loans — a topic also addressed in drafts of the 21st Century ROAD to Housing Act — could make it easier to extend credit to more borrowers buying modest homes.

It could help less sizable banks manage the higher costs of making small loans by allowing them to charge higher rates above the standard cap without incurring additional non-QM liability.

However, since lifting the QM points-and-fees-limit would allow for a higher interest rate, its impact on the cost of the loan to the consumer could be limited.

“We might pick up a couple more loans on the margin, but I don’t think it entirely solves the problem when it comes to the cost to originate,” said Ron Haynie, senior vice president of mortgage finance policy at the Independent Community Bankers of America.

Other rules have provided leniency for less-sizable loans because they may face more difficulty meeting the points-and-fees caps, but exempting them from the limits entirely could take this a step further. 

It’s not clear how small a mortgage would need to be to qualify. In some other contexts they’ve been up to $100,000 or $150,000.

Other QM exceptions already in place

The broader extension of the safe harbor in line with references to tailoring QM and ATR requirements for smaller banks has precedents that could inform the path it takes. 

These include:

• A more expansive portfolio loan exemption for less sizable “small creditors” also predates the 2018 legislation. The definition of smaller creditors has been set at $2.785 billion in assets and no more than 2,000 first-lien mortgages for 2026.

Portfolio loan possibilities

With the executive order suggesting a broader safe harbor for portfolio loans, one result could be that more sizable “smaller” banks making these mortgages may become eligible for breaks from non-QM liability than have been in the past.

The first part of the EO refers to the “smaller bank” universe referred to as going up to $100 billion while also noting that “community banks” with less than $30 billion in assets are “especially affected” by mortgage-related regulatory burdens.

Giving a larger range of banks a way to remove non-QM liability could cut some risk-based costs for making for nontraditional loans even if with the removal of points-and-fee cap opening up the possibility of raising the mortgage’s rate.

Self-employed borrower implications

QM’s definition is generally aimed at reducing liability for loans with standard pricing, underwriting and features. So loans outside its bounds are generally taken out by gig workers and business owners, some of which have been served by non-QM specialists. 

That means companies making those loans could face some new competition if certain institutions get an QM exemption due to the executive order.

“This could give an edge to whichever banks it applies to in the self-employed space,” said Richard Horn, former senior counsel and special adviser for the CFPB. He is currently a co-managing partner at law firm Garris Horn.

While an extension of the QM safe harbor against liability provides some protection for nontraditional loans, it’s not necessarily bulletproof, he warned.

“There’s nothing to prevent a consumer from challenging the QM status of any loan,” Horn said.

Much depends on definitions

Many provisions in the executive order around a QM safe harbor are subject to interpretation, such as whether it gets extended fully or makes exceptions for any of its elements such as product features.

Key definitions “are left to regulators,” Kara Ward, an attorney at Baker Donelson, wrote in her analysis of the executive order.

Another important determinant of the outcome is what the boundaries of portfolio loan are, which hasn’t been consistently defined in other contexts.

Certain performing non-QM loans that become “seasoned” after being held in portfolio for at least three years do get a safe harbor after that time. So the executive order seems to suggest a broader definition than that. 

If the portfolio loan definition were to be pegged to a three-year hold period, the question arises as to whether these loans keep or lose their QM safe harbor if sold after that time. 

In some contexts involving the three-year hold, loans do retain their safe harbor after that time even if sold. In some cases a portfolio or seasoned loan safe harbor is only retained if it’s sold to a similarly eligible institution.

The broader view for the CFPB

Since a lot of the order’s language about changing ATR, QM and many other things is broad and potentially could go far beyond portfolio loans, there’s a possibility the seasoned loan definition and other things could be impacted too, changing the entire landscape.

“The statute gives the CFPB a ton of discretion,” Horn said.

That said, the line between what the bureau can do and where Congress should be involved has been questioned in court. Some advocates of deregulation might view that discretion in a new light if they back these attempts to loosen CFPB rules. Consumer advocates might too, Horn said.

A far-reaching change to ATR and QM could face some resistance because the rules around sizing up consumers’ ability to repay were considered a cornerstone of mortgage underwriting reform after the Great Financial Crisis. 

Another potential hurdle when it comes to how or whether the proposed extension of safe harbor moves forward is how fast a downsized CFPB might move on drawing up a potential change. It could be a reason to sustain some bureau operations in order to get the EO fulfilled.

“It would be hard to undertake this massive reform effort if you’ve staged a reduction in force that affects 90% of the staff. So this could have the effect of preventing the complete shutdown of the CFPB,” said Horn. “It might not mean supervision and enforcement are operating as normal, but at least it could keep the Office of Regulations open.”