May 24, 2020

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Building A Home As A New Borrower

Construction Loans For First-Time Home Buyers

At press time, many portions of the United States are considering some kind of return to business as usual in the wake of lockdowns and coronavirus containment measures. 

For better or worse, some portions of the country are opening more than others and this will likely include real estate markets and house hunting as progress is made. And that means some first-time home buyers will be exploring their options soon.

Did you know that even as a first time borrower, you may be eligible for a One-Time Close construction loan that allows the borrower to build a home on their own lot rather than buying someone else’s property?

One-Time close loans are available for VA borrowers, FHA loan applicants, even USDA borrowers. These loans do require some additional legwork and documentation, but for those more interested in building a house than buying existing construction the effort is well worth it.

What do you need to keep in mind about building a home with a One-Time Close loan?

FICO score requirements from your chosen lender may be a bit higher than you might be held to for an existing construction purchase. That’s not an insurmountable issue but it does mean you will need to monitor your credit and keep your scores within the lender’s requirements.

For some loans such as VA construction loans there is no VA-required down payment in most cases. For FHA construction loans, the down payment remains the same for qualified borrowers–the minimum down is 3.5% for an FHA One-Time Close mortgage.

Some borrowers will, on the heels of tough financial times, feel the need to reduce out-of-pocket costs on the loan up front. If that situation describes you, it’s crucial to have a talk with your loan officer about the realities of construction loans including the importance of hiring the right builder for the job.

A contractor who doesn’t have experience doing the scale of work you want may come cheaper, but will they cost more in the long run? Good things to ask ahead of your loan.

Don’t be in a rush with a construction loan; the permitting process alone can take more time than you expect, especially in competitive housing markets where there may be longer processing times due to volume.

Learn More About FHA, VA and USDA One-Time Construction Close to Permanent / Single-Close Construction Loans

One-Time Close Loans are available with VA, FHA and USDA Mortgages.  We have relationships with several large Mortgage Banking firms who specialize in these loans which also go by the following names: 1 X Close, Single-Close Loan or OTC Loan.

Our extensive research on these programs and their guidelines allow us to educate potential home buyers who want to explore purchasing a newly constructed home versus purchasing a resale home while utilizing the same down payments for each product type.

We are constantly updated on these programs and have extensive knowledge on VA (Department of Veterans Affairs), FHA (Federal Housing Administration) and USDA (United States Department of Agriculture) One-Time Close Construction programs.

We speak directly to the licensed lenders that originate these residential loan types in most states. They 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.

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 multifamily units (no duplexes, triplexes or fourplexes).  Home types include:  Site-Built, Modular or Manufactured Homes.

In addition, the following are “NOT” allowed under these programs:
Kit Homes – Steel Framing Kits, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar or Wind Powered Homes.

Your response to authorizes us to share your personal information with a licensed mortgage lender that is familiar with your area to contact you.

  1. Send your first and last name, e-mail address, and good contact 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 veterans, the down payment is $0 up to the maximum amount that the debt ratio will allow – there are no maximum loan amounts as per the Department of VA. Most lenders will go up to $750,000. If not, the FHA down payment is 3.5% up to the maximum FHA Lending Limits for your county and the USDA down payment is $0 and based on maximum income.

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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