November 26, 2018
There are several different kinds of loan options you can explore if you want a home built for you instead of purchasing an existing-construction house. The type of home loan known as an FHA One-Time Close construction loan is available to provide a single loan application and closing date for your mortgage.
The VA One-Time Close loan and USDA One-Time Close construction loan have similar features but these three types of construction loan do not have identical features and they are not appropriate for all borrowers. Of the three, FHA One-Time Close loans (known as FHA OTC loans) offers construction loan options to a wider range of applicants.
Why?
USDA One-Time Close Construction Loans
USDA One-Time Close loans allow financially qualified borrowers to apply for a single loan to build and buy a home. Unlike the FHA version of this mortgage, the USDA OTC loan has income limits which will vary depending on how many applicants are on the loan, and whether the home is to be purchased in a region served by USDA loans.
USDA loans also have restrictions on the property types you can build using this type of mortgage. You cannot use a USDA One-Time Close Construction loan to build the following:
- Purchase of an existing manufactured home
- Condominiums
- Properties with more than a single unit
The restrictions above are USDA program requirements; the lender may have additional property types it will not permit. Some lenders do not allow any property to be built other than “stick-built” homes, while others may not permit site condos, single-wide trailers, or log homes. This will depend on the lender, not the USDA program guidelines.
Those who meet the income limit requirements, and want to build a home that is on the list of approved types for both the lender and the USDA program itself should look into the USDA version of the One-Time Close loan as you may have an option for no money down on the transaction depending on circumstances, lender policy, and other factors.
VA One-Time Close Construction Loans
The Department of Veterans Affairs offers financially qualified and service-qualified military members the ability to apply for a no-money down loan to build a home with terms quite similar to the FHA version of this one-time close mortgage.
The VA leaves FICO score requirements and other factors up to the lender and borrowers who take advantage of the zero-downpayment option will be pleased to save money up front on this traditional home loan expense.
What’s the catch? Why don’t more people look into the VA One-Time Close mortgage option? Generally because it is not available to the public; VA home loans are offered to those who have served a minimum amount of time in the U.S. military and to certain qualifying surviving spouses.
If you are not a qualifying military spouse or a military member who has met the minimum time-in-service requirement, you cannot apply for a VA One-Time Close construction 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.
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