December 13, 2018

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One-Time Close Mortgages: The Differences Between VA, FHA, And USDA

One-Time Close Mortgages: The Differences Between VA, FHA, And USDA

There are several different kinds of loan options you can explore if you want a home built for you instead of purchasing an existing-construction house. The type of home loan known as an FHA One-Time Close construction loan is available to provide a single loan application and closing date for your mortgage.

The VA One-Time Close loan and USDA One-Time Close construction loan have similar features but these three types of construction loan do not have identical features and they are not appropriate for all borrowers. Of the three, FHA One-Time Close loans (known as FHA OTC loans) offers construction loan options to a wider range of applicants.

Why?

USDA One-Time Close Construction Loans

USDA One-Time Close loans allow financially qualified borrowers to apply for a single loan to build and buy a home. Unlike the FHA version of this mortgage, the USDA OTC loan has income limits which will vary depending on how many applicants are on the loan, and whether the home is to be purchased in a region served by USDA loans.

USDA loans also have restrictions on the property types you can build using this type of mortgage. You cannot use a USDA One-Time Close Construction loan to build the following:

  • Purchase of an existing manufactured home
  • Condominiums
  • Properties with more than a single unit

The restrictions above are USDA program requirements; the lender may have additional property types it will not permit. Some lenders do not allow any property to be built other than “stick-built” homes, while others may not permit site condos, single-wide trailers, or log homes. This will depend on the lender, not the USDA program guidelines.

Those who meet the income limit requirements, and want to build a home that is on the list of approved types for both the lender and the USDA program itself should look into the USDA version of the One-Time Close loan as you may have an option for no money down on the transaction depending on circumstances, lender policy, and other factors.

VA One-Time Close Construction Loans

The Department of Veterans Affairs offers financially qualified and service-qualified military members the ability to apply for a no-money down loan to build a home with terms quite similar to the FHA version of this one-time close mortgage.

The VA leaves FICO score requirements and other factors up to the lender and borrowers who take advantage of the zero-downpayment option will be pleased to save money up front on this traditional home loan expense.

What’s the catch? Why don’t more people look into the VA One-Time Close mortgage option? Generally because it is not available to the public; VA home loans are offered to those who have served a minimum amount of time in the U.S. military and to certain qualifying surviving spouses.

If you are not a qualifying military spouse or a military member who has met the minimum time-in-service requirement, you cannot apply for a VA One-Time Close construction loan.

We have done extensive research on FHA One-Time Close mortgages and spoke directly to these licensed lenders for most states. These are qualified mortgage loan officers who work for lenders that know the FHA One-Time Close 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 onetimeclose@fhanewsblog.com authorizes FHANewsBlog.com to share your personal information with a licensed mortgage lender in your area to contact you.

Please note that the FHA One-Time 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? Yes or No. If either of you are eligible veterans, 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

November 26, 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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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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