March 2, 2021

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One-Time Construction Loan Amortization: What You Need To Know Before You Sign

Home Loans For Building On Your Own Land

The FHA One-Time Close construction loan allows you to have a house built to your specifications rather than buying an existing home.

This loan, which also has a VA mortgage counterpart as well as a USDA version, gives borrowers the ability to choose a specific design instead of settling for one you aren’t as interested in.

An One-Time Close loan, which is offered to first-time home buyers and experienced home owners alike, provides the means for you to build on your own lot. You can also choose to purchase land with the loan funds as well as building the home.

One Time Close loans can take longer depending on how fast the construction phase of the loan goes, but the ability to approve the design and features of the home offset this waiting time.

Amortization Of A Construction Loan

When using a construction loan, all borrowers should be mindful of amortization issues. Loan amortization is defined in part as the amount of money you must pay each month for the entire duration of your home loan to pay it off in full.

Take the total home loan amount due (including all costs rolled into the loan, basically the full loan amount and not just principal and interest) divided by the total number of months of the loan.

 If you apply for a 30-year mortgage and the construction phase of your mortgage takes six months (this is an arbitrary number we selected and is NOT what you should actually expect for completion times which may vary greatly depending on circumstances), here you should know that the delay in moving in may also translate into a delay in when your full mortgage payment begins.

FHA loan rules in the FHA Single Family Home Loan Handbook about when your mortgage payments on a construction loan should start:

How Long Will It Take To Pay Off?

“The Mortgage must be endorsed within 60 Days of the final inspection or issuance of the Certificate of Occupancy (CO), whichever is later.”

That establishes when the lender must endorse the loan, but the date of issuance of the Certificate of Occupancy plays an important role in the start of mortgage payments on the construction loan.

“Amortization of the permanent Mortgage must begin no later than the first of the month following 60 Days from the date of the final inspection or issuance of the CO.”

When Your Payments Begin

For One Time Close mortgages, mortgage payments do not necessarily begin on the date your loan is approved.

Furthermore, you need to remember that any delay there is in your mortgage payments does NOT translate into an extension of your mortgage. There is no extension–the final payment is still due on the same date regardless of when you start making your home loan payments.

Depending on the start of those payments, you may wish to consider a larger payment at the ending months of your loan or increase your monthly payments in the meantime to make up for the lost time.

FHA mortgages including One Time Close loans have zero penalty for early payoff–making larger payments is not a problem (some consider making one single much larger payment at the end of the loan–ask your lender about this option if you decide that is the way to go) but it is important to understand how amortization works and make an informed decision on which way to go.

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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