June 26, 2017
What is the FHA One-Time Close / Single-Close Construction Program? In our previous blog post, we discussed the basics of this FHA construction loan program-what it means to the borrower seeking an FHA new construction loan and how having a single loan (instead of two loans as with typical construction loan situations) can be an advantage for the borrower.
FHA One-Time Close mortgages are for those who want an FHA construction loan for a property that has yet to be built. They can be more complex than typical new purchase FHA loans, but for those who need a construction loan, One-Time Close has definite advantages.
They include a single closing date, and an early mortgage loan interest rate lock that can potentially safeguard the borrower against rising mortgage rates should they occur.
Who is eligible for an FHA One-Time Close loan?
One-Time Close mortgages generally require the borrower to have a minimum FICO credit score at or near 620. Borrowers with FICO scores below 660 may be required, depending on the lender and other factors, to have at least two credit scores. The lowest FICO score is used for loan approval decisions.
Depending on the lender, there may be guidelines about what type of property may be built using an FHA One-Time Close mortgage loan. You may find that stick-built homes are given preference with this type of FHA construction loan. A stick-built home, also known as a site-built home, is a typical construction project, with the home built on site as opposed to having a modular home which is shipped to the home’s location and assembled in sections.
Depending on the lender, you may find that modular or manufactured homes are not eligible for FHA One-Time Close loans.
For the construction phase of the home purchased with a One-Time Close mortgage, an approved builder must be used. Potential FHA borrowers with questions about this aspect of the loan should have a discussion with the lender, as requirements and procedures for approved builders may vary from place to place.
Appraisal issues for these types of home loan transactions are different that purchase existing construction homes. Appraisals and other compliance requirements may be conducted “as completed”, so borrowers will need to discuss the timing of those activities with the lender.
Borrowers are still required to pay for appraisal fees, compliance inspection fees, and related services as part of the FHA loan process with One-Time Close loans. Escrow may be required, and you’ll need to discuss those arrangements with your participating lender.
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.
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