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One-Time Close Construction Hints

February 12, 2023

Home Loans For Building On Your Own Land

One-Time Close (OTC) loans allow borrowers to build a house on their own lot instead of having to choose from existing properties. You can be a first-time home buyer and still be approved for a One-Time Close construction loan, also known as Single-Close loans or Single-Close construction mortgages.

If you have never examined your options on the real estate market, it’s easy to assume you aren’t financially qualified for a construction loan. After all, that sounds like a very big undertaking, doesn’t it? Having a house built for you?

That may sound like something that other people might qualify for, but the fact is that FHA and VA OTC loans have the same requirements as any other FHA or VA mortgage. These loans are designed to be more affordable, and that includes the construction loan option.

Your lender might require slightly higher FICO scores depending on the size and scope of your construction project, however, there are no unusual requirements to qualify for this loan overall. Typical FICO score ranges are required, not extrordinary ones.

Different Types Of OTC Loans Open To You

There are VA, FHA, and even USDA One-Time Close loans, and no matter which loan program you choose, you have the advantage of a government-backed mortgage with a lower down payment requirement–just 3.5% minimum and 10% down for those who have scores that fall into a lower FICO range.

Because construction loans may require extra planning, applications for permits, and other processes that are not required for existing construction loans, be sure to add in plenty of extra time to apply for permits when the time comes, to research plans and home designs.

Your OTC loan money pays for the construction phase of the project, but you will encounter expenses along the way that are not covered by the loan. Closing costs you must pay in cash, followup or compliance inspections, such as any required follow-up inspections, flood zone determination, and other expenses should be anticipated and planned for.

You can ask your loan officer about what to expect and how much time you should spend saving based on a rough estimate of the expenses you’ll pay in cash. There are other questions to ask, too.

For example, what is the typical processing time for permit applications in that housing market? Is extra time needed to get these permits? In some housing markets, getting a permit can take many months longer than in other areas.

Find out what the typical completion times for these projects, how long you should expect to remain in your current home, etc. Some borrowers may be on the fence about a construction loan, wanting the benefits but not sure about the cost or the time frames involved.

Be sure to ask the lender to show you a side-by-side breakdown of the OTC loan compared to an existing construction mortgage.

This can be helpful if you don’t fully understand how the construction loan process works and need to see how quickly (or not) you can get into a new home.

Don’t be in a hurry with a construction loan. If you need to move into a home faster than the time it takes to build one, consider other options such as the FHA 203(b) home loan, an FHA Rehab loan for fixer-uppers, or even an FHA condo loan.

Want More Information About One-Time Close Loans?

One-Time Close Loans are available for FHAVA 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 personal information with (one) mortgage construction lender licensed in your area to contact you. Your credit report will NOT be pulled due to sending this and we do not ask for Social Security numbers.

  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 $1,000,000 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.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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