March 7, 2021

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FHA One-Time Close Construction Loans: Five Facts You Should Know

FHA One-Time Close Loan

You don’t have to purchase someone else’s house–you can use an FHA construction loan to build your dream home to your specifications using plans you approve. The FHA One-Time Close construction loan makes it easier by eliminating the two-loan process, consolidating the construction loan into a single application, a single approval process, and a single closing date.

Construction Loan Fact One: Multiple Options

FHA One-Time Close mortgages are not the only option; there are several different types of One-Time Close loans, also known as single-close construction loans. There’s the FHA version, but also a USDA construction loan for those who demonstrate financial need, and a VA construction loan version for those with qualifying military service.

And these construction loans are available for any financially qualified borrower who meets program standards. Those who apply for the FHA version do not have to be a first-time home buyer to qualify. USDA and VA construction loans might not be as available to the general public as FHA mortgages are, but many will qualify for one of these three options.

One-Time Close Construction Loan Down Payment

There are down payment requirements for construction loans which may seem the same as for any other type of home loan; FHA applicants will pay 3.5% down, VA One-Time Close construction loan borrowers have the option to put no money down, and in all cases for these government-backed construction loans there is no penalty for early payoff of the loan. 

In some cases there may be no down payment requirement at all, even on an FHA construction loan. How does that work? Anyone who comes to this loan process already owning the land the home will be built upon could find it possible to have the down payment waived. You’ll want to ask your lender about this option as early as possible.

However, in cases where land must be purchased in conjunction with the construction loan, a down payment is required for FHA construction loans. VA and USDA both have zero-down options you should explore if you’re interested in one of those programs.

Who Does The Work?

In general, you may find it is required by the participating lender to hire others to do your construction work–you can’t hire yourself or your relatives–your lender will have specific guidelines for hiring contractors for these loans.

FHA One-Time Close Construction Loans And First-Time Buyers

The FHA construction loan is not restricted to first-time home buyers and that includes construction loans. Some mistakenly believe FHA mortgages are only for first-time buyers or economically disadvantaged borrowers. This is not true. USDA loans have options specifically intended for those who meet household income caps and need-based requirements, but VA and FHA mortgages do not.

Types Of Home You Can Build

You cannot build an occasional-occupancy house using a USDA, VA, or FHA One-Time Close loan. You can’t build a home you do not intend to occupy as your home residence with these construction loans. Occupancy is required; investment properties, vacation homes, and non-residential properties are not approved for these loans.

You also cannot use an FHA construction loan, VA One-Time Close, etc. to build a tiny house, a shipping container home, barndominium, or other “unusual” properties that don’t have “comparables” to establish their value in that housing market. Log cabin homes and similar property types are much harder to find comparables for, don’t be surprised to find a lack of support for government-backed construction loans for these property types.

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 veterans, 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.

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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