You can build a house from the ground up using a One-Time Close construction loan; many borrowers want to take advantage of these types of loans as the government-backed versions of the One-Time Close construction loan feature very low down payment requirements and the same financial qualification rules as other VA or FHA mortgages.
One Time Close Myth: I Can’t Afford To Build A Home Instead Of Buying One
It’s easy to assume that building a home will cost you more money than buying an existing construction property. But what kind of home do you need? Are you building a house to start a family in? Or are you building a home that you want to retire in?
The overall cost of your project will depend on details like these, but you don’t have to include costly features such as an extra living unit (some lenders won’t approve multi-unit construction loans regardless, so this would not be an issue in such cases), and you can also apply to have additional funds included in the loan for money-saving energy-efficient features in the home.
Remember, construction loans allow you to have a say in the design of the property, and “going green” is a concern for many. One advantage you have in building instead of buying? Knowing how energy efficient and environmentally friendly your new home is based on what you decide on the design.
One-Time Close Loan Myths: Only For Certain Home Buyers
Some people assume they could not qualify for an FHA construction loan or a VA construction loan because they are not first-time home buyers. This is not true.
FHA construction loans are open to any financially qualified borrower (FHA credit score requirements state FICO scores 500 or above typically qualify under FHA guidelines, but lender standards also apply).
If you have FICO scores that meet both the FHA and the lender’s standards, you may be able to qualify (assuming your other financial qualifications meet lender requirements) for a construction loan the same as with any other type of FHA or VA mortgage.
(Remember, we mention VA loans in this article as a reminder that military members, veterans, and qualifying surviving spouses of military members may be eligible for a VA mortgage, but VA loans aren’t open to the general public.)
One-Time Close Myths: Higher Down Payments Required
One-Time Close loans have the same down payment rules (VA and FHA) as for any other type of new purchase home loan backed by the VA or FHA. A higher down payment is not automatically required just because you want a VA or FHA construction loan and not a different VA or FHA loan product.
Some home loans do require higher down payments due to circumstances such as the asking price of the home being higher than the appraised value, but in general down payment issues for FHA and VA construction loans are similar to existing construction loans.
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 email@example.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).
- Send your first and last name, e-mail address, and contact telephone number to firstname.lastname@example.org
- Tell us the city and state of the proposed property.
- 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.
- 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.