November 26, 2018
In our last blog post, we discussed how VA, USDA, and FHA One-Time Close mortgage loans differ.
USDA One-Time Close construction loans have income limits and restrictions on certain property types, VA loans are similar to the FHA version except they are restriction to military members who have served a minimum amount of time in uniform (and certain qualifying military spouses).
But what does the FHA One-Time Close construction loan have to offer?
For starters, the FHA One-Time Close (OTC) loan is available to any financially qualified borrower who wants to build and buy a primary residence in an approved configuration.
FHA loan rules require the home to be owner/occupied, not used as an investment property, and the home must conform to both FHA minimum standards once completed and the lender’s requirements.
FHA construction loans in the OTC category offer these borrowers a single loan application and closing date for both the construction phase of the home and the mortgage loan itself. This is not necessarily the case with non-OTC type construction lending.
You won’t have to worry about being approved for one loan and turned down for another as with more traditional construction loans.
FHA mortgage guidelines state that the minimum FICO score to qualify is 580 or higher for maximum financing and the lowest amount of down payment.
But for OTC mortgages you may find the lender has additional standards including a FICO score range in the mid-600s, a lender requirement that tax returns be filed in a specific manner (no amendments within a certain date range of the loan transaction for OTC mortgages is one such lender requirement though not necessarily found at all financial institutions).
Your lender may not approve all the types of homes available to consider under the FHA One-Time Close construction loan program; technically the FHA loan rules permit multi-unit homes to be built but participating lenders may not permit houses with multiple units, or homes that are not “stick-built” as opposed to manufactured or modular homes.
FHA loans have more forgiving requirements in general compared to some other lending products, but for a construction loan you will need to discuss with the lender things like the lender’s additional standards for construction loans, any complicating factors that may apply such as lengthy construction permit approval periods, etc.
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. This type of loan allows for you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.
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 to one licensed construction lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.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 allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT act as your own general contractor (Builder) / not available in all States.
In addition, this is a partial list of the following homes/building styles that are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth-Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.
Your email to info@onetimeclose.com authorizes Onetimeclose.com to share your personal information with a mortgage construction lender licensed in your area to contact you.
- 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 $1,000,000 and review higher loan amounts on a case by case basis. If not an eligible veteran, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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