August 5, 2020

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Construction Loans For First-Time Home Buyers

Construction Loans For First-Time Home Buyers

Some first-time homebuyers have a dream to build a home on their own land. These borrowers may wish they had more home buying experience so that they could pursue this dream.

The good news is that with an FHA One-Time Close construction loan, even a first-time home buyer can potentially qualify for the loan that features one application, one closing date, and no worries about needing to apply for a second loan for the mortgage after the construction loan has been approved.

The FHA One-Time Close construction loan can be used by first-time homebuyers with better credit (many participating lenders require slightly higher FICO scores for construction loans).

It’s best not to be in a hurry to get the home completed since the process of hiring and using contract laborers can be time-consuming depending on location, demand, and other variables.

Depending on where you want to build your home, the amount of time needed simply to obtain permits could be an issue. California home buyers experience this issue, as do other crowded housing markets where there is a lot of home construction happening.

So you’ll need to talk these details over with your loan officer to learn what is typical where you want to build the home.

FHA loan rules in HUD 4000.1, often referred to as the FHA Single-Family Home Loan handbook, allow borrowers to act as their own contractor, apply for a construction loan to build up to four-unit homes, etc. But you will need to ask the lender if their construction loan program supports multi-unit homes, whether you are allowed by that financial institution to do your own work, etc.

Some lenders may not allow you to do your own labor, some may not allow multi-unit properties, and you may find other lender requirements depending on where you shop around for your home loan.

Don’t apply to just one lender, compare rates, terms, and credit requirements to see which program works best for you.

You could also consider applying for a VA construction loan if you or a co-borrower are qualified veterans or currently serving military members (see below).

VA construction loans have no down payment required in most cases unless your loan exceeds certain limits (ask your lender). Zero downpayment home loans are hard to come by, so if you are qualified to apply for a VA construction loan instead or think you might be, talk to a participating lender.

The advantages of a construction loan include the ability to select your own appliances, choose your color schemes, decide on a basement or garage living space, and much more. There is greater flexibility all around with a construction loan depending on your budget and your goals for the house.

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.

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 by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially. 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). In addition, the following homes/building styles are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.

Your email to authorizes to share your personal information with a mortgage lender licensed in your area to contact you.

  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 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.
  4. 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 $750,000 and review higher loan amounts on a case by case basis.   If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
Joe Wallace - Staff Writer

By Joe Wallace

November 15, 2019

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 for (8) years and is currently the Associate Editor for

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About 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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