April 30, 2018
In addition to new purchase home loans and refinance loans, a borrower’s options for a mortgage also include loans that allow money for home improvements, renovations, and even construction.
Know your FHA loan options before you choose a type of property or the kind of loan you seek. There are many ways to get additional funds to fix, rehab, or even build a home from the ground up.
FHA New Purchase Home Loans
There is an option with most FHA mortgages including new purchase loans that allows added funds for the purpose of buying and installing energy-efficient upgrades to the home. No matter what type of FHA mortgage you want, ask the lender about the FHA Energy Efficient Mortgage option which allows up to $6,000 or more depending on the project, credit qualifications, and other factors.
FHA Energy Efficient mortgages can also be used in nearly any of the loans mentioned below, but lender requirements and other factors may affect these transactions.
FHA One Time Close Construction Loans / Single Close Construction Loans
The FHA One Time Close construction loan / Single Close construction loan, also known as a construction-to-permanent loan, allows borrowers to have a home built for them from the ground up. Construction loans may require, depending on the lender, higher FICO scores than other types of loans, but many borrowers find the freedom to choose designs and layouts to be a very important part of the home buying process and prefer to have a house built.
Construction loans require the use of escrow, and depending on the length of the construction phase the borrower may need to discuss how the loan will properly amortize since mortgage payments won’t begin coming due until after the construction phase is complete.
Such arrangements may very lender to lender, but the most important thing for the borrower to know is that regardless of when the loan starts being paid, it must be paid off within the loan term.
If there is a one year delay from closing to occupancy and the mortgage payments begin after that year is over, there will either need to be an adjustment in the monthly amount due, or a discussion with the lender about alternative means to pay off the loan within the original term.
Construction loans come in both standard “two close” versions requiring two applications and closing dates-one for the construction loan and the other for the mortgage loan itself. Ask your borrower about the One Time Close construction loan option, it may be a big advantage over the “two close” construction loan option.
FHA Rehab Loans
FHA rehab loans are designed especially for borrowers who want to to rehab, repair, or renovation work on an existing property. These rehab loans come in two basic types-a standard loan for large projects and a limited rehab loan for smaller rehab applications. Rehab loans are also available for those trying to repair or replace a home in a federally declared disaster area.
FHA Cash-Out Refinance Loans
The money from FHA cash-out refinancing can be used for any purpose acceptable to the lender including home improvements. If you are interested in cashing in on the value of your home to free up money to make home improvements, ask your loan officer about cash-out refinancing as an alternative to other types of loans-especially if you have a project that isn’t big enough to apply for a standard FHA rehab loan.
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: