You can use an FHA One-Time Close construction loan, (or a VA construction loan or even a USDA OTC mortgage) even a first-time home buyer to choose to build a new home on your own land or land you buy in conjunction with the loan. This is an option for those who want a house with designs they have approved instead of buying someone else’s existing property.
Getting Your Loan Started
Finding a participating FHA lender (or a VA or USDA lender depending on the loan you choose) is an important part of the construction loan process. You should also know that while construction loan mortgages do require higher FICO scores, and need more time before move-in day than a typical home purchase loan, the end results are well worth it.
But just as important? Finding the right builder.
One-Time Close loans don’t allow the borrower, builder, relatives of the buyer, etc . to act as contractors. You are required to select a builder who can submit certain documentation requirements your contractor will have to meet in order to be approved to work on your home; submission of the builder’s licensure and credentials, certificates of insurance (including both general liability and Workers’ Compensation) must all happen as a condition of loan approval.
Down Payment Requirements
Some borrowers want to save as much out of pocket as possible ahead of a home loan, but making a bigger down payment can help lower the long-term cost of your mortgage, and for FHA One-Time Close Construction loans, VA OTC loans, and USDA OTC equivalents, there is no penalty for early payoff of the mortgage. Whatever you decide, there are some lender standards you may find typical with this type of home loan.
One Time Close loans generally–due to those lender standards–do not permit down payment assistance programs. What’s more, like any other home loan your down payment must meet program standards–it must come from approved sources and cannot be sourced from non-collateralized loans such as payday loans or credit card cash advances.
Before You Apply
In some cases, even if you feel ready to apply for a home loan, it may make sense to wait. Why might you want to delay an application until conditions are right? If you have applied for bankruptcy but you have not had more than 24 months pass since your bankruptcy is discharged, you will need to wait until you have had 24 full months pass since the bankruptcy was discharged–NOT 24 months not since the FILING date.
You should also wait if you have had a 30-day late payment in the last 12 months. Wait to apply for the loan until you have a record of all payments made on time, every time, for at least 12 months ahead of the loan application.
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.
FHANewsblog.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 allow
s 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.
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- 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 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.