Construction-to-Permanent Loans in Middle Tennessee: One Close, Slab to Keys

If you are going to build a house in Wilson, Rutherford or Davidson County, the loan you pick decides more than your rate. It decides whether you get approved once, at the start, or whether you have to prove yourself all over again a year from now when the house is finished. A construction-to-permanent loan is the version where you are approved once.

How one close works, from slab to keys

A one-time-close loan is underwritten and closed before construction starts. At that closing you sign for the whole thing: the lot payoff or purchase, the construction budget, and the permanent mortgage that follows. Then it behaves in three phases.

1. Closing. If you are buying the lot, it is purchased here. If you already own it with a loan on it, that balance is paid off here and rolled in. Nothing is built yet.
2. The build. The loan works like a line of credit. Money is released to your builder in stages as work is completed and inspected, and you make interest-only payments on what has been drawn so far. Month one, that is a small number. By the last draw it is close to a full payment.
3. Conversion. When the county issues the certificate of occupancy and the lender’s final inspection signs off, the loan converts to a standard amortizing mortgage. No new application, no second appraisal of your income, no second closing table.

That third step is the whole reason this loan exists. Everything you qualified on at the start is what you are held to at the end.

One-time close vs. two-time close, in dollars

The alternative is a short-term construction loan from one lender, followed by a separate permanent mortgage you apply for when the house is done. Sometimes that is the right call. Usually it is the riskier one, and people choose it without realizing they did.

The row people underrate is the job change. A twelve-month build is a long time. Promotions, layoffs, a spouse going part-time, a new car payment: any of those can move a debt ratio past the line, and on a two-time close you find out with a half-finished house and a construction loan coming due.

What each program asks for

Construction-to-permanent is a structure, not a single loan. It comes in conventional, FHA, VA and USDA versions, and they are not equally easy to find. As a broker I can shop the lenders who actually offer each one, which matters more here than on almost any other loan (it is the core of the mortgage broker vs. a bank difference).

All four are for a home you will live in, and all four expect a licensed, lender-approved builder. The zero-down versions are real and worth the extra paperwork. The program pages on VA loans in Tennessee and USDA loans in Tennessee cover eligibility in full, and if you are looking at a lot out past the Lebanon city limits, read USDA loans in Wilson County before you assume you need a down payment at all.

A $450,000 build in Wilson County, worked through

Here is the math on an illustrative build. It is not a quote and there is no rate in it, because the cash is what decides whether this works for you.

Say you own a lot outside Lebanon worth $90,000, free and clear. Your builder’s contract is $327,000, and you carry a $33,000 contingency line, about 10%. Total project cost: $450,000.

• On a conventional loan at 90% of total cost, the loan is $405,000 and you need $45,000 in equity.
• Your lot is worth $90,000. That is 20% of the project, so the land alone covers the down payment twice over, and a loan at 80% of cost ($360,000) is on the table with no mortgage insurance.
• If you are buying the lot instead, you bring the down payment in cash or through the land purchase, and both the lot and the build close together.

One caution on how that land is valued. Lenders size the loan against the lower of your total cost and the appraiser’s as-completed value, and many use what you paid for the lot rather than today’s value if you bought it recently. Ask me before you assume a lot you bought last spring is worth what the neighbor’s sold for.

How the draws pay your builder

Your builder does not get a lump sum. Money is released after each stage is finished and an inspector confirms it. Schedules vary by lender and builder, but on the $327,000 contract above, a five-draw schedule might look like this:

Two things follow from that table. Your interest-only payment grows each time a draw goes out, so budget for the last few months, not the first. And your builder has to carry the cost of each stage until the inspection clears. Established builders expect that. A small operator who wants a big deposit up front is telling you something about their cash flow, and the lender will usually say no to it anyway.

What is different about building in Middle Tennessee

The loan is the same everywhere. The dirt is not. Four local things I would plan around:

• The builder has to be licensed. Tennessee requires a contractor license from the Board for Licensing Contractors on projects of $25,000 or more, which is every whole-house build. The lender checks the license, insurance and track record, and a builder who has never been through a construction-loan approval can slow the file down by weeks. Bring me your builder early.
• Rural lots need septic approval before anything else. Much of Wilson County outside the city limits is not on sewer. The state soil evaluation and septic permit come before the building permit, and most lenders want that in hand before closing. A lot that will not perc changes the whole plan.
• Rock. Wilson County sits on shallow limestone. Footings, a crawlspace or a basement can run into rock that nobody priced. Read the rock clause in your builder’s contract, and this is exactly what the contingency line is for.
• Buying new in a Murfreesboro subdivision is usually not a construction loan. If a builder owns the lot and is building inventory, the builder carries the construction financing and you buy the finished house with an ordinary purchase mortgage. That is a different conversation, and I covered the builder’s-preferred-lender side of it on the Murfreesboro mortgage broker page.

The timeline, realistically

Plan on four stages, and start the financing conversation months before you want to break ground, not weeks.

1. Pre-approval and builder review: a week or two to know what you qualify for and whether your builder will pass.
2. Plans, budget, septic and appraisal: typically 45 to 60 days from a signed contract to closing, driven mostly by how fast the plans, budget and permits come together.
3. The build: most one-time-close programs allow a 12-month construction period, with extension provisions if weather or the builder runs long. A custom home here commonly takes most of it.
4. Conversion: a final inspection, the certificate of occupancy, and the loan becomes your permanent mortgage.

The next step

Bring me three things: the lot (an address or parcel), your builder’s name, and a rough budget. From that I can tell you which program fits, whether your land covers the down payment, and whether your builder is likely to clear lender approval. The full program details are on the construction loans in Tennessee page.

Construction-to-permanent loan FAQ

What is a construction-to-permanent loan?

A single mortgage that pays for building a house and then becomes your long-term mortgage when the house is finished. You close once, before construction starts, pay interest only on the funds drawn during the build, and the loan converts to a standard 15- or 30-year mortgage when the certificate of occupancy is issued.

How much do I need down to build a house in Tennessee?

It depends on the program. Conventional one-time-close loans typically need 10% to 20% of the total project cost, FHA needs 3.5% with a 580 or higher score, and VA and USDA construction loans can be $0 down for eligible borrowers and properties. Land you already own free and clear usually counts toward the down payment.

Can I use land I already own as my down payment?

Usually, yes. The equity in a lot you own counts toward the required down payment, and on many builds it covers all of it. On a $450,000 project, a lot worth $90,000 is 20% of the total cost. If you bought the lot recently, the lender may use your purchase price rather than today’s value.

Do I make mortgage payments while the house is being built?

Yes, but interest only, and only on the money that has been drawn so far. Payments start small after the first draw and grow as the builder completes each stage. Full principal-and-interest payments begin after the loan converts to the permanent mortgage.

How long can the construction phase last?

Most one-time-close programs allow about 12 months of construction, with extension provisions if the build runs long. Setting up the loan before construction typically adds 45 to 60 days for plans, budget, builder approval, permits and the appraisal.

Can I be my own general contractor?

Rarely on a construction-to-permanent loan. Almost every one-time-close lender requires a licensed builder they have approved, and in Tennessee any project of $25,000 or more requires a licensed contractor. If you plan to act as your own builder, expect a much shorter lender list and a larger down payment.