One-Time Closings: A Smarter Way to Finance Construction in Alaska

One-Time Closing (OTC), often called a single close construction loan, is now a key tool for new construction home financing. At Residential Mortgage, we’re excited to offer our own OTC loan to simplify the path from plans to move-in, with one closing up front and a single set of closing costs. With a traditional two-close process, the borrower finances construction first, then applies later for the permanent mortgage. Closing costs are paid on the construction loan and then again on the permanent loan. With an OTC, you pay one set of closing costs. An OTC loan combines those phases: close once, fund the construction, then once the home is completed, the loan converts automatically to the long-term mortgage. This results in significant savings for the buyer.

An OTC loan also allows a buyer to purchase a lot, fund home construction and obtain long-term financing with a single closing. The minimum down payment is 5% on the total cost to build, including the cost to purchase the land. If you already own land, the value of your land can reduce any down payment requirements. One closing reduces buyer upfront costs and simplifies the home financing process between groundbreaking and move-in day.

Why Buyers Like It

A One-Time Closing loan reduces the risk of needing to be requalified later for long-term financing. Income, credit and market conditions can change during a build, and a second approval can create stress and delay. Closing once provides a clearer path and a more predictable plan.

It also helps address interest-rate uncertainty. With Residential Mortgage’s OTC loan, the long-term rate is locked before construction begins. Residential Mortgage’s program also includes a no-cost float-down option, allowing the buyer to take advantage of a lower rate if the interest rates improve during the build.

To help manage the costs during the building phase, interest is typically charged only on funds disbursed, not the full loan amount.

Why Builders Should Care

For builders, the model brings structure. Funds are released through draws based on progress and inspections, supporting cash-flow planning and creating a clear paper trail. Because the project is thoroughly vetted and underwritten before construction begins, there is very little risk to the builder. Builders avoid tying up their own line of credit, since the OTC loan is taken out by the borrower. Once the buyer has closed on their OTC loan, there is no need for them to reapply when the home is completed, which removes uncertainty for their long-term financing.

What Makes a Project Loan-Ready

The smoothest projects share a few traits:

• Clear plans and specifications, not a concept sketch.

• An itemized budget with a realistic contingency.

• A timeline that reflects Alaska seasonality and logistics.

• A draw schedule tied to milestones, with inspection expectations understood.

• Clean documentation for permits, subcontractors and builder requirements.

From the borrower’s side, lenders still underwrite the long-term mortgage. Income documentation, assets, reserves and debt-to-income ratios matter from day one.

Local Lending Matters in Alaska

Alaska construction is different. Appraisals, access, seasonality and local building practices influence projects. Working with a local lender, backed by an Alaska-based bank, can help keep things moving when questions come up mid-build. For our clients, support from Northrim Bank means local knowledge and accountability, as well as a team that understands Alaska’s nuances.

A Better Experience for Everyone

OTC mortgage loans improve predictability and create a cleaner handoff from construction to occupancy and redundant closing costs are avoided.

Residential Mortgage

NMLS 167729

3700 Centerpoint Dr., STE 500

(907) 222-8833

Disclaimer: Terms and conditions apply. Information subject to change without notice. Qualified borrowers only. This is not a commitment to lend. Please call for details.