May 16, 2018
House hunters looking for government-backed mortgages (as opposed to conventional mortgages which may have higher down payment requirements and other features) have a variety of options to choose from. Are you in the market for an FHA construction loan such as the FHA One Time Close construction mortgage? Do you need to build instead of buy?
FHA One-Time Close / Single-Close Construction Loans
Borrowers who choose the FHA One Time Close / Single-Close mortgage are applying for a single mortgage loan covering both the construction phase and the mortgage itself. These loans are for those who want to build a home from the ground up, and there are additional requirements for these loans regarding escrow, inspections, and when mortgage payments are scheduled to being.
One Time Close (OTC) loans or Single-Close loans from participating FHA lenders may have varying requirements. You may find some lenders will only approve FHA OTC mortgages for single unit residences only. Others may restrict these loans to “stick built” homes and not permit manufactured housing.
Much depends on the lender and the nature of the construction project; talk to a loan officer before hiring architects or spending any money on the pre-construction phase of the loan; you’ll need to know lender-specific requirements that can affect your transaction ahead of time.
FHA One Time Close loans are for owner-occupiers; you cannot use these loans for commercial properties or a home you or one of the borrowers on the loan won’t personally occupy.
VA One Time Close Construction Loans – VA Single-Close Construction Loans And More
The Department of Veterans Affairs offers qualifying service members and veterans the VA Home Loan benefit, which includes an option for a VA One Time Close construction loan. VA construction loans, like their FHA One Time Close counterparts, will be affected by lender standards and certain restrictions may apply.
For example, the borrower should not expect to act as his or her own contractor; the builders must be VA-approved and there will be specific requirements for the property in terms of meeting appraisal guidelines, building codes, and more. Borrowers applying for VA One Time Close mortgages have a no-money down option, which may be affected by the borrower’s financial qualifications.
In addition to VA and FHA OTC loans, there is also an option for approved borrowers in rural areas from the USDA.
VA and USDA One Time Close mortgages both have unique rules; the USDA One Time Close loan is restricted to qualifying rural areas with specific population sizes; borrowers will need to qualify for the loan based on USDA guidelines for both location and financial need. The VA One Time Close mortgage is not a need-based loan.
Both VA and USDA mortgages are similar to their FHA construction loan counterparts in that they require occupancy and cannot be used for commercial properties.
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: