July 30, 2026
Some house hunters eventually stop looking at existing homes and start thinking about building one from the ground up. Others know from the beginning of their homeownership search that they want to build rather than buy. FHA loan rules include guidelines for lenders who want to help these borrowers get financing.
The section of the rulebook covering this option is titled “Building on Own Land,” and it tells lenders how to proceed with this type of loan, including maximum loan amounts, who can act as the general contractor, and other requirements borrowers should know about before they start planning.
Are you interested in having a house built for you on land you already own, rather than choosing from existing construction? Building on your own land may be the right move, and the right home loan option, for you.
The FHA Definition
FHA guidelines describe Building on your Own Land as the permanent financing of a newly constructed home on land already owned by the borrower. These loans are permitted to include paying off, or “extinguishing,” any construction loan used to build the home in the first place.
The Maximum Mortgage
When you want to build on your own land, the lender is required to use the lesser of the appraised value or the documented acquisition cost to determine the adjusted value of the home. The maximum mortgage amount is then calculated using the appropriate purchase loan-to-value percentage of whichever of those two figures is lower.
So what counts as the documented acquisition cost of the property? FHA guidelines say it includes:
- The builder’s price, or a total of all subcontractor bids and materials
- Borrower-paid options and construction costs not included in the builder’s price
- Interest and other costs tied to a construction loan the borrower obtained to fund construction, if applicable
The cost of the land itself is also factored in, using an either/or standard: the lesser of the cost of the land or its appraised value if the land has been owned six months or less at case number assignment, or the appraised value of the land if it has been owned longer than six months, or was received as an acceptable gift.
Because the rules for calculating acquisition cost and choosing a general contractor can affect both your loan amount and your lender options, it’s worth discussing your specific plans with a loan officer early, before you’ve committed to a builder or a piece of land.
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. This type of loan allows for you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.
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 (one) licensed construction lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.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 for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT act as your own general contractor (Builder) / not available in all States.
In addition, this is a partial list of the following homes/building styles that are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth-Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.
Your email to info@onetimeclose.com authorizes Onetimeclose.com to share your information with (one) mortgage construction lender licensed in your area to contact you. Your credit report will NOT be pulled.
- 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 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 $1,500,000 and review higher loan amounts on a case-by-case basis. If not an eligible veteran, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
Or go to our site and Request Additional Information.
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 FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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