October 30, 2017
There is still time to consider an FHA construction loan in 2017. Those who are more interested in having a brand-new home built especially for them rather than purchasing an existing construction home with an FHA mortgage will be pleasantly surprised at the options available to them.
FHA construction loans are different than other types of FHA mortgages and can be a bit more complex, but thanks to the FHA One-Time Close construction loan this process isn’t as complicated as other types of construction loans. Why?
A Single Application and Closing Date For FHA One-Time Close Construction Loans
The FHA One-Time Close construction loan is referred to in the FHA loan handbook, HUD 4000.1, as a “construction-to-permanent” mortgage. Some construction loans require the borrower to qualify twice; once to pay for the construction and once for the mortgage itself. Under such loans there are two closing dates, etc.
Construction-to-permanent loans have a single loan, a single closing date, and a defined set of parameters for how the loan is to proceed during the construction phase and beyond. An escrow account is required to pay the expenses of construction and related fees, and the borrower in general will not be obligated to make mortgage payments until a specified time after the final inspection of the completed work (usually 60 days).
FHA One Time Close Construction Loans And The Maximum Mortgage Amount
According to HUD 4000.1, the maximum mortgage amount for these FHA construction loans are calculated as follows:
“The Mortgagee must use the lesser of the Property Value or the documented Acquisition Cost to determine the Adjusted Value.
The documented Acquisition Cost of the Property includes:
-builder’s price or the sum of all subcontractor bids and materials;
-value of the land as shown in the site value of the appraisal; and
-interest and other costs associated with a construction loan obtained by the Borrower to fund construction.
If the Property being constructed is Manufactured Housing, the builder’s price to build must include the sum of the cost of the unit(s) and all on-site installation costs.”
You read that correctly, FHA One Time Close mortgages are available for manufactured housing. Not all participating FHA lenders may offer all FHA loan products, so it’s best to discuss your needs with a loan officer. That is especially true if you are interested in a construction loan for manufactured housing.
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 to 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 allows 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 a mortgage construction lender licensed in your area to contact you.
- 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 $1,000,000 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.
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.
Browse by Date: