July 8, 2020

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FHA One-Time Close Construction Loan Rules

FHA One-Time Close Construction Loan Rules

What do borrowers need to know about FHA One-Time Close construction loans? There are two very important areas to keep in mind. One involves the lender’s specific requirements to qualify for this single-close construction loan, and the other involves FHA loan rules.

The two are not always identical and this is something to be aware of when going into the loan application process.

FHA One-Time Close mortgages are different than existing construction loans because the home must be designed, built, and paid for from the ground up and there are varying time frames under which this will be done.

Purchasing an existing construction home means getting to move in much more quickly, but the trade-off is that you are purchasing someone else’s home rather than having one built especially for you.

FHA One-Time Close Loan Requirements: Number Of Units Allowed

The FHA standards for One-Time Close or OTC construction loans includes the ability to apply for a loan to finance the construction of a multi-unit property. Under FHA loan guidelines you are permitted to apply for a loan for primary residences with as many as four living units.

Lender Requirements For FHA One-Time Close Construction Loans: Living Units May Be Restricted

Some participating lenders may not approve FHA OTC construction loans for projects involving more than one living unit. Be sure to ask your loan officer whether you can get approved for a mortgage on a construction project with more than one living unit.

FHA Loan FICO Score Standards Versus Lender Requirements

Like most other FHA mortgages, FHA One-Time Close construction loans have FHA minimum FICO score requirements (580 or higher for maximum financing and the lowest down payment) but the lender’s standards are usually higher.

You may find that for OTC loans, lender FICO score requirements may trend higher than for existing construction loans. In some cases the lender may also have additional credit history requirements such as no late payments or missed payments of any kind on housing-related payments (rent or mortgage) within a certain span of time leading up to the mortgage.

Be sure to ask your lender how their standards may vary from the FHA minimums.

Learn More About FHA, VA and USDA One-Time Construction Close to Permanent / Single-Close Construction Loans

One-Time Close Loans are available with VA, FHA and USDA Mortgages.  We have relationships with several large Mortgage Banking firms who specialize in these loans which also go by the following names: 1 X Close, Single-Close Loan or OTC Loan.

Our extensive research on these programs and their guidelines allow us to educate potential home buyers who want to explore purchasing a newly constructed home versus purchasing a resale home while utilizing the same down payments for each product type.

We are constantly updated on these programs and have extensive knowledge on VA (Department of Veterans Affairs), FHA (Federal Housing Administration) and USDA (United States Department of Agriculture) One-Time Close Construction programs.

We speak directly to the licensed lenders that originate these residential loan types in most states. They 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.

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 multifamily units (no duplexes, triplexes or fourplexes).  Home types include:  Site-Built, Modular or Manufactured Homes.

In addition, the following are “NOT” allowed under these programs:
Kit Homes – Steel Framing Kits, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar or Wind Powered Homes.

Your response to  onetimeclose@fhanewsblog.com authorizes us to share your personal information with a licensed mortgage lender that is familiar with your area to contact you.

  1. Send your first and last name, e-mail address, and good contact 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 veterans, the down payment is $0 up to the maximum amount that the debt ratio will allow – there are no maximum loan amounts as per the Department of VA. Most lenders will go up to $750,000. If not, the FHA down payment is 3.5% up to the maximum FHA Lending Limits for your county and the USDA down payment is $0 and based on maximum income.

About FHANewsBlog.com
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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