FHA One Time Close / Single Close construction loan requirements include different FICO score, escrow, and closing requirements than standard new purchase mortgages. Do you know how FHA One Time Close construction loans work?
A Single Loan For The Entire Process
Construction loans typically require two loans-one to purchase, and one to pay for the construction. Under the FHA One Time Close construction loan program, also known as an FHA construction-to-permanent mortgage, there is a single loan. This prevents the need for a borrower to be credit-qualified twice during the lending process.
The procedure for an FHA One Time Close loan has the loan closing first, in order to pay for the land, followed by the construction phase. That means an escrow account is required in order to disburse funds to pay for the home building process.
Requirements of the Borrower
According to the FHA official site, “The borrower must have contracted with a builder (must be a licensed general contractor) to construct the improvements”. However, FHA loan rules do permit the borrower to act as the contractor, but “only if the borrower is also a licensed general contractor”.
There are other requirements-the FHA loan applicant must “be purchasing the land at the closing of the construction loan, or have owned the land for six months or less at the date of case number assignment”.
Owner Occupiers Only
FHA One Time Close mortgages are only for primary residences-you cannot get this type of home loan for a property that at least one borrower on the loan will use as their primary residence. FHA loan rules for this type of transaction allow the construction of a property with as many as four living units, but the borrower must live in at least one of them.
Lender Standards Will Apply
FHA One-Time Close loans are subject to FHA FICO score requirements; keep in mind that FHA minimums are not the only standards which apply. Lender requirements for this type of home loan may be higher than FHA minimums, and state/local law may also have a say in how the home building process is to proceed.
Some lenders require the property securing the One Time Close loan to be a “stick-built” home only rather than a modular home or a manufactured home. However, some lenders do permit non-stick-built properties. If you need a construction loan for a modular or manufactured home, be sure to ask the lender up front whether that financial institution allows those transactions.
Learn More About FHA, VA and USDA One-Time Construction Close Loans / Single-Close Construction Loans
We have done extensive research on One-Time Close / Single-Close mortgage loans and spoke directly to the licensed lenders for most states. These are qualified mortgage loan officers who work for lenders that know the product well.
Each company has supplied us the guidelines for their product. If you are interested in being contacted by one licensed lender in your area, please respond to the below questions to save time. All information is treated confidentially.
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Please note that the One-Time Close / Single-Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes).
- Send your first and last name, e-mail address, and contact telephone number.
- Tell us the city and state of the proposed property.
- Tell us your credit score and/or the Co-borrower’s credit score, if known. 620 is the minimum qualifying credit score for this product.
- Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veteran’s, the down payment is $0 up to the maximum VA lending limit for your county. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.