December 11, 2019

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FHA One-Time Close Construction Loans And Other Government-Backed Mortgages

FHA Construction Loans And Other Government-Backed Mortgages

House hunters looking for government-backed mortgages (as opposed to conventional mortgages which may have higher down payment requirements and other features) have a variety of options to choose from. Are you in the market for an FHA construction loan such as the FHA One Time Close construction mortgage? Do you need to build instead of buy?

FHA One-Time Close / Single-Close Construction Loans

Borrowers who choose the FHA One Time Close / Single-Close mortgage are applying for a single mortgage loan covering both the construction phase and the mortgage itself. These loans are for those who want to build a home from the ground up, and there are additional requirements for these loans regarding escrow, inspections, and when mortgage payments are scheduled to being.

One Time Close (OTC) loans or Single-Close loans from participating FHA lenders may have varying requirements. You may find some lenders will only approve FHA OTC mortgages for single unit residences only. Others may restrict these loans to “stick built” homes and not permit manufactured housing.

Much depends on the lender and the nature of the construction project; talk to a loan officer before hiring architects or spending any money on the pre-construction phase of the loan; you’ll need to know lender-specific requirements that can affect your transaction ahead of time.

FHA One Time Close loans are for owner-occupiers; you cannot use these loans for commercial properties or a home you or one of the borrowers on the loan won’t personally occupy.

VA One Time Close Construction Loans – VA Single-Close Construction Loans And More

The Department of Veterans Affairs offers qualifying service members and veterans the VA Home Loan benefit, which includes an option for a VA One Time Close construction loan. VA construction loans, like their FHA One Time Close counterparts, will be affected by lender standards and certain restrictions may apply.

For example, the borrower should not expect to act as his or her own contractor; the builders must be VA-approved and there will be specific requirements for the property in terms of meeting appraisal guidelines, building codes, and more. Borrowers applying for VA One Time Close mortgages have a no-money down option, which may be affected by the borrower’s financial qualifications.

In addition to VA and FHA OTC loans, there is also an option for approved borrowers in rural areas from the USDA.

VA and USDA One Time Close mortgages both have unique rules; the USDA One Time Close loan is restricted to qualifying rural areas with specific population sizes; borrowers will need to qualify for the loan based on USDA guidelines for both location and financial need. The VA One Time Close mortgage is not a need-based loan.

Both VA and USDA mortgages are similar to their FHA construction loan counterparts in that they require occupancy and cannot be used for commercial properties.

Learn More About FHA, VA and USDA One-Time Close / Single-Close Mortgages

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.

Your response to authorizes us to share your personal information with a licensed mortgage lender in your area to contact you.

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).

1. Send your first and last name, e-mail address, and contact telephone 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 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.

Bruce Reichstein - Staff Writer

By Bruce Reichstein

May 16, 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 where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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About 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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