April 9, 2020

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FHA Loan Options For New Construction Homes: FHA One-Time Close Mortgages And More

FHA Loan Options For New Construction Homes: FHA One-Time Close Mortgages and More

FHA loan options for buying new construction homes include the FHA One-Time Close / Single-Close Construction Mortgage, which allows a borrower to apply once and have a single closing date for a house built from the ground up.

FHA One-Time Close mortgages differ from other construction loans because this type of construction loan eliminates the two-step construction loan application process where the borrower applies once for the costs of construction, and has a closing date for that loan, then applies a second time for the mortgage on the property itself.

It’s definitely an advantage to have a single application and closing date. But what are the other options to compare this type of loan to? It’s good to know what you can get from multiple options-making an informed choice to build a home using a One-Time Close loan is definitely the best thing to do.

FHA New Construction

HUD 4000.1 has a set of criteria which defines what type of FHA home loan you may need to apply for. There are loans for existing construction homes, and new construction. The phrase “new construction” can refer to one of three basic types of circumstances. From HUD 4000.1:

Proposed Construction refers to a Property where no concrete or permanent material has been placed. Digging of footing is not considered permanent.

Under Construction refers to the period from the first placement of permanent material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.

Existing Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or equivalent. The Property must have never been occupied.

Other Home Loan Options

Some borrowers want a home that is built for them, from the ground up. This can happen with an FHA One-Time Close loan, which is also referred to as a construction-to-permanent loan. But there are also those who don’t have a priority on having a home built especially for them-a house that has never been occupied is perfectly acceptable.

There are FHA home loans available for these properties, which are technically classified as “new construction” but with a sub-classification (as described above) of properties “existing less than one year”.

FHA construction loans may also be available (depending on circumstances) for the assembly of manufactured housing (including the cost of the unit and all on-site installation expenses, according to HUD 4000.1).

In all cases, the borrower has an FHA loan option for these new construction housing types. New construction loans may have higher FICO score and credit history requirements, and the process for buying and having the home built are more complex than for purchasing existing construction properties that have at least one previous owner.

Speak with a loan officer to determine what kinds of construction loans may be popular in your housing market, or to learn about FICO score requirements and loan approval timelines.

Learn More About FHA, VA and USDA One-Time Construction Close to Permanent / Single-Close Construction Loans

One-Time Close Loans are available with VA, FHA and USDA Mortgages.  We have relationships with several large Mortgage Banking firms who specialize in these loans which also go by the following names: 1 X Close, Single-Close Loan or OTC Loan.

Our extensive research on these programs and their guidelines allow us to educate potential home buyers who want to explore purchasing a newly constructed home versus purchasing a resale home while utilizing the same down payments for each product type.

We are constantly updated on these programs and have extensive knowledge on VA (Department of Veterans Affairs), FHA (Federal Housing Administration) and USDA (United States Department of Agriculture) One-Time Close Construction programs.

We speak directly to the licensed lenders that originate these residential loan types in most states. They 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.

Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes).  Home types include:  Site-Built, Modular or Manufactured Homes.

In addition, the following are “NOT” allowed under these programs:
Kit Homes – Steel Framing Kits, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar or Wind Powered Homes.

Your response to  onetimeclose@fhanewsblog.com authorizes us to share your personal information with a licensed mortgage lender that is familiar with your area to contact you.

  1. Send your first and last name, e-mail address, and good contact number.
  2. Tell us the city and state of the proposed property.
  3. 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.
  4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, the down payment is $0 up to the maximum amount that the debt ratio will allow – there are no maximum loan amounts as per the Department of VA. Most lenders will go up to $750,000. If not, the FHA down payment is 3.5% up to the maximum FHA Lending Limits for your county and the USDA down payment is $0 and based on maximum income.
Bruce Reichstein - FHA News Author

By Bruce Reichstein

January 25, 2018

Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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