December 11, 2019
If you are interested in building a home on your own lot instead of buying a house owned by someone else, the One-Time Close construction loan is an option worth considering.
Facts about One-Time Close mortgages include your options–there are FHA, VA and USDA versions of the One-Time Close Construction (OTC) loan. With a VA OTC, there is an option to put 0% down, FHA construction loans feature a low down payment of 3.5% of the adjusted price of the home in most cases.
Construction loans require you to work with an approved contractor so you should plan on spending some time searching for one.
Construction loans are sometimes hard to come by because borrowers don’t know the right loan to ask for, or are working with a lender who does not offer the loan you need. It’s best to tell your loan officer upfront if you are committed to building instead of buying, explain your price range, and see what the lender can do to help.
Participating lenders who offer One-Time Close loans will explain the program in detail, but don’t sign any paperwork if there are areas you don’t fully understand. Ask your loan officer to explain these areas to you for best results.
FHA construction loans, with their 3.5% down payment and low interest rates, permit the borrower to build a single-unit property using a licensed contractor. FHA loan rules technically let the borrower to act as her own contractor under the right circumstances but you will find that in general lenders may not permit this.
FHA loans have no income restriction, need-based requirements, and they do not require that the person having the home built to suit be a first-time home buyer.
VA One-Time Close mortgages feature a military service requirement and such loans are not offered to the public. borrowers who have qualifying military service will find the VA Construction Loan option an important option thanks to the 0% down option.
It pays to take extra time with a construction loan; it’s not good to be in a hurry. Construction projects can run into delays for a variety of reasons including weather, staffing, budget issues, delivery of materials, and more.
Expect to have a detailed conversation about project timelines, realistic move-in dates, and any required inspections or follow-up inspections that may be needed before you can schedule your moving day.
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. This type of loan allows for you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.
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 to one licensed construction lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.com 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). You CANNOT act as your own general contractor (Builder) / not available in all States.
In addition, this is a partial list of the following homes/building styles that are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth-Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.
Your email to info@onetimeclose.com authorizes Onetimeclose.com to share your personal information with a mortgage construction lender licensed in your area to contact you.
- Send your first and last name, e-mail address, and contact telephone number.
- Tell us the city and state of the proposed property.
- 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.
- 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 $1,000,000 and review higher loan amounts on a case by case basis. If not an eligible veteran, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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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