February 24, 2020

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FHA One-Time Close Construction Loans: Advice For First-Time Home Buyers

FHA One-Time Close Construction Mortgage Advice For First Time Home Buyers

First-time home buyers aren’t always looking for a pre-existing home. Some want to have a house built to suit according to design plans they have personally approved. The FHA One-Time Close construction loan is an excellent option for those who want to build a home instead of having to scour the housing market for just the right property.

It’s good to explore FHA mortgage loan options in this area by asking a participating lender about the FHA One-Time Close (OTC) construction loan which allows a single loan application and a single closing date instead of the more traditional construction loan which features two loan applications and closing dates.

One closing date is for the construction phase and there is also a second loan and closing date for the mortgage itself. Compare features between the two types of construction loan (OTC versus the two-closing date type construction loan) to get an overview of how each program works.

If you want to explore construction loan options, there are several things to anticipate including a higher FICO score requirement from some participating lenders, and certain restrictions from certain lenders such as a requirement that the borrower not do her own work but use FHA-approved contractors instead.

You may find that One-Time Close loans are available for single-unit homes, but some lenders won’t allow multi-unit properties. Others may allow multiple unit homes but refuse to issue OTC loans for manufactured housing or modular homes.

These rules will vary depending on the lender. The basic FHA loan requirements themselves (as written by the FHA and HUD) are the same as for other mortgages; lender standards is where you may find the greatest variation in rules.

The best advice on FHA One-Time Close loans you can get is to aggressively shop around for the right lender for you-ask about the requirements for this kind of loan versus existing construction mortgages and compare features and options between FHA lenders carefully. What is possible at one financial institution may not be possible at another depending on circumstances.

Learn More About FHA/ VA / USDA 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.

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

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).

  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?  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.
Bruce Reichstein - Staff Writer

By Bruce Reichstein

December 27, 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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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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