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.
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.
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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.