January 28, 2020

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Construction Loan Advice For New Borrowers

Construction Loan Advice For New Borrowers

Are you thinking about using a construction loan to build a home from the ground up on your own land? The FHA One-Time Close construction loan features a low 3.5% down payment even for those who have never borrowed or purchased a home before.

There is also a VA version of the One-Time Close construction mortgage offering 0% down to qualified veteran borrowers, those who still serve, and certain military spouses.

The One-Time Close construction loan offers a single mortgage application for both the construction of the home and the mortgage itself; borrowers no longer have to apply for one loan to build and one loan for the mortgage. That means peace of mind during the entire process, but there are some rules and guidelines you’ll need to follow during the construction loan and the project.

Here is some good advice about what to do during your One-Time Close construction loan.


You will need to plan on hiring a licensed general contractor, and while FHA loan rules technically permit the borrower to act as her own builder, you may find the lender does not allow this or only permits it under certain circumstances.

You will need to ask your loan officer what is possible in this area since lender standards apply in addition to FHA loan rules.

If there are significant changes in the project, or if there are delays or rising costs, you will need to keep your loan officer in the loop. That is especially true if the contractor has repeated issues in this area.

Remember to ask about your builder’s risk insurance policy, as well as standard home insurance details–does your lender’s name appear as the mortgagee? This is required at closing time, so make sure you give yourself and the process enough time to complete before your closing date.

Funding and Time Tables

Monitor the One-Time Close construction funds carefully; you and your lender will have an easier time solving them if they are detected as early as possible. You should plan on finishing your entire project as faithfully as possible to the original plans.

If you are not experienced with construction loans, you should ask your lender and partner with a reputable title company. Between these two resources, you should be able to quickly determine what is appropriate for draws, payments, etc.

You should ask the lender and title company what limitations there are on cash draws and related issues. Most forward mortgages, especially FHA mortgages, have limits on the amount of cash that can go to the borrower except in the form of refunds. For construction loan draws there will be similar restrictions on how the funds can be withdrawn, paid, etc.

Learn More About VA, FHA, Or USDA One-Time Close / Single-Close Construction Loans Today

We have done extensive research on FHA, VA and USDA 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 so, 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 18, 2019

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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