Are construction loans available for first-time home buyers? Some may feel daunted at the idea of having a house built for them from the ground up, but the reality is that some house hunters would rather have a home built just for them rather than buying one with a previous owner.
What options are available to first time home buyers who want a construction loan?
The first thing to remember is that being a first time buyer does not count against you when looking into your construction loan options. What you should be more concerned with is the nature of the loan itself.
Some construction loans feature two applications and two closing dates, but One-Time Close construction loans / Single-Close construction loans offered by the VA, USDA, and FHA allow a single application and closing date for the entire transaction.
The FHA and VA have no specific programs aimed at benefiting those who have never bought a home before. Participating lenders may, however, and it’s important to ask the lender about any available first time buyer or first time borrower programs available in your housing market.
One Time Close construction loans are not out of reach for those with medium to lower incomes; the USDA offers construction loans in a program that has income restrictions. USDA One Time Close construction loans are similar to VA and FHA construction loan offers in that the borrower must use an approved builder, is required to have an escrow account, and must not get cash back on the transaction (except for refunds).
Construction loans are not out of reach for financially qualified borrowers regardless of their experience as home owners. Construction loans sound expensive, and it’s true that you may pay more to have a home built to suit. But for many, the results are worth the expense.
Want More Information About One-Time Close Loans?
One-Time Close Loans are available for FHA, VA and USDA Mortgages. These loans also go by the following names: 1 X Close, Single-Close Loan or OTC Loan.
We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
FHANewsblog.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allow
s for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
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- 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 and/or the Co-borrower’s credit profile: Excellent – (680+), Good – (640-679), Fair – (620-639) or Poor- (Below 620). 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, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $750,000 and review higher loan amounts on a case by case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.