Coverage from the Ground Up: Your Guide to Construction-to-Permanent (C2P) Loans

[Updated August 2, 2024]

So, your borrowers have decided to build their home or pursue owning a newly constructed home. When working with your customers during this process, you’ll need to first familiarize yourself with the basics of Construction-to-Permanent (C2P) loans.

If your borrower requires PMI for their loan, we at Enact have specific guidelines to suit both your investor’s requirements and your borrower’s situation. You can find more detailed information in our Underwriting Guidelines.

Let’s walk through some of these details and highlight some crucial points you’ll want to remember when originating your C2P loans and ordering the MI.

Here’s the Breakdown:

Your first step in originating a C2P loan is to understand your investor’s guidelines for structuring the transaction based on the borrower’s situation. Remember that a loan on a newly constructed home is not considered a C2P loan and would follow standard guidelines like any other transaction. This blog post will focus only on C2P loans.

Generally, C2P loans fall into one of two types:

1. Single Close Construction Loan:
   • Borrower is underwritten and qualified one time according to the terms of the permanent financing.
   • Upon completion of the construction, the loan converts to a permanent long-term mortgage.
   • Only one set of closing docs and one closing, with a modification option at time of construction completion.
   • Can be either a purchase or refinance.
2. Two Close Construction Loan
   • Consists of two sets of closing docs and two separate loan closings.
   • First closing is for the Construction Loan that is used to build the property.
   • Second closing secures a new long-term loan to replace the Construction Loan once property is completed.

Here at Enact, we insure both Single Close or Two Close transactions, providing flexible MI activation options.

How Enact Plays a Role:

Enact insures both Single Close and Two Close transactions and provides coverage options:

• • 15 month MI commitment term to accommodate the construction period
  • MI coverage during the construction phase or upon completion of construction

Want to Learn More?

You can always refer to our Underwriting Guidelines for a more in-depth look at Construction-to-Permanent loans. Our dedication to helping borrowers achieve the dream of homeownership doesn’t stop here — we offer training resources to help you help your borrowers too.

We also have a Guide to Construction-to-Permanent Loans and Enact MI,  a quick snapshot of key features for identifying C2P loans when ordering from Enact for your borrower’s PMI.

And, if you want to learn more about these C2P loans or need some extra insight, you can always contact your Enact Sales Rep for more info too. They’ll be happy to help you meet your business needs, answer questions, and point you in the right direction.

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