December 4, 2021

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Build Your Dream Home From The Ground Up With A One-Time Close Construction Loan

Build on your own lot. Construction loan basics

You don’t have to buy someone else’s property if you are interested in owning your own home. You can–even as a first time home buyer–build a home from the ground up instead.

The FHA One-Time Close mortgage, also available to qualifying military members as a VA construction loan, is a great choice for the right borrowers. But who should consider this type of home loan?

Timing Counts

FHA Construction Loans and VA One-Time Close mortgages are not good choices for those in a hurry. If you need housing quickly it is best to explore your FHA or VA mortgage loan options for existing construction. If the timing of your loan cannot be changed, you need a house NOW, and you cannot wait, there are good reasons to wait on building from the ground up.

Why? It takes time to select the plans to build your home, you will need to find an approved builder and you should expect to hire a builder rather than acting as your own contractor as most lenders won’t allow you to do your own construction work.

FICO Scores Are Important

FHA One-Time Close construction loans are good for borrowers who aren’t worried about being able to qualify for the home loan with their FICO scores. 

In general, participating lenders may have higher credit standards for construction loans than for existing construction mortgages. Be sure to ask the lender what FICO score ranges are acceptable for building your home on your own lot.

FHA construction loans can be very good for those who want a certain type of housing–you can choose the style, the materials, the appliances, etc. 

Approved Housing Types Only

Some housing fads including as tiny homes, barndominiums, log cabin homes, or shipping container houses have sent many potential homeowners running for their banks wondering if an FHA or VA mortgage can help them build such a home. But unfortunately, these housing fads are not the kinds of homes you can build with a VA or FHA One-Time Close mortgage.

A Construction Loan Is For Construction Needs Only

A construction loan requires planning; you and your lender will work together to plan the loan including setting up an escrow account for the money you will need to pay contractors, purchase materials, etc. Know that the money you get from the loan is not considered “cash out” and can only be used for approved purposes associated directly with the construction of the home.

You can’t use these funds for other purposes. In general, with government-backed mortgages, you cannot get cash back at closing time except in the form of refunds.

Mortgage Payment Start Dates

If you choose to build your home with a One-Time Close construction mortgage, do NOT forget to discuss the timing of your mortgage payments with your loan officer. Your monthly payments may not be due until the construction phase is over but that does not change the overall payoff date of the mortgage.

That means your mortgage is still be required to be paid off within the term of the loan–if you get a 30-year loan and you don’t make a hypothetical mortgage payment until six months later, you still must pay off the entire mortgage within the term of the loan and not the term of the loan plus six months. 

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.
Bruce Reichstein - FHA News Author

By Bruce Reichstein

December 9, 2020

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 where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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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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