Why should borrowers consider applying for an FHA One-Time Close (OTC) Construction Loan to build a home in 2019? There are several reasons why having a home built for you from the ground up rather than purchasing an existing construction property might be appealing.
FHA One-Time Close mortgages are construction loans that have a single application and closing date; they require the use of escrow and the borrower can either purchase land to build on or use the land already owned.
What are the motivations for using an FHA OTC?
FHA One-Time Close Construction Loans have lower down payment guidelines, equity in the land owned could be used toward the FHA down payment requirement where applicable, and the borrower makes no mortgage payments during the construction phase of the loan.
There are other motivations. You may see websites discussing a lower amount of available housing inventories, creating a condition where there is more demand for existing construction homes than there is a supply of them.
With a construction loan, you don’t need to compete with other house hunters to find an existing property; your home will be built to your specifications rather than looking at someone else’s design and trying to decide if it’s right for you.
FHA One-Time Close loans can be intimidating for some borrowers who aren’t used to the process-at first. Once you learn how the FHA OTC loan works you will have a much better understanding of the process and how it can benefit you.
One thing you will learn about this process is that the loan’s interest rates are locked in prior to construction; you will be protected from future increases in the rate.
One-Time Close loans may have additional requirements from the participating lender, and some restrictions may apply to these loans that don’t apply to others.
For example, some lenders will only fund the construction of a single-unit property with an FHA OTC. Ask your loan officer if you need a multi-unit home; find out what your chosen lender is willing to do in this area before proceeding.
The best thing to do if you are considering building a home from scratch in 2019?
Talk to a loan officer who can help you decide on the best course of action for your home loan. FHA One-Time Close loans require more planning than buying a property that has already been built, but many feel the trade-off is worth the effort in terms of getting the dream home you envision rather than trying to find one in a competitive housing market.
Learn More About FHA 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.
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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.