May 19, 2021
Are you interested in applying for a home loan to build or buy a house of your own? FHA mortgage loan options allow a wide variety of choices when it comes to a first home.
And you do not have to be purchasing your first house to use an FHA mortgage–as long as you are buying a home you want to live in as your main address and financially qualify, an FHA home loan may be for you.
The range of those FHA loan options may surprise you. Did you know a first-time homebuyer has the option to purchase a condo unit using an FHA mortgage?
The condo project may be on or added to an FHA-approved list but starting in 2021 it is also possible to have a loan approved (depending on circumstances) for a condo unit not on an approved list if the property meets FHA requirements.
There are also options for first-time borrowers to apply for FHA loans designed for buying and remodeling a property. There are also FHA home loans that allow you to build instead of buying an existing home. These loans are called FHA Construction-to-Permanent loans or FHA One-Time Close mortgages.
FHA Loan Rules And Option You Should Know
It is true that in general, FHA home loans don’t come with a zero-down option the way USDA mortgages and VA home loans do.
On the other hand, FHA mortgages let you use approved down payment gifts, grants, or other options for down payment assistance. This down payment help, which usually comes from a local agency or state-funded operation providing affordable housing grants or other assistance, must meet FHA guidelines, state law, and lender requirements.
There are state programs aimed at low-income applicants and moderate-income borrowers; some may include provisions for applicants purchasing property in targeted areas.
Buying a home in a targeted area is a way that those who do not meet first-time buyer requirements or income restrictions featured on some state loan and down payment assistance programs can still get down payment help.
You read that correctly–you do not have to be a first-time buyer to get certain types of down payment assistance on a home loan in your area. Much depends on the terms and conditions of the individual down payment assistance program.
Remember, the FHA does not operate down payment assistance programs, but your state housing finance authority might.
FHA Construction Loan Options
The FHA One-Time Close mortgage is an option offered to financially qualified applicants including first-time buyers and repeat borrowers.
You may find that participating FHA lenders are unwilling to accept down payment gifts or grants in conjunction with a One-Time Close loan; you may be required to make the down payment yourself in such cases as a condition of loan approval.
FHA Down Payments
You might not be able to get a down payment gift in connection with an FHA construction loan but there is another option for those who already own the land they want to build on.
An FHA borrower who wants to build a home on their own lot can use land equity in the lot they own (if there is sufficient equity) as the down payment on the mortgage.
Some financial help may come from the seller of the property. While it is true that FHA borrowers cannot get down payment assistance from the seller of the home, the seller is able to contribute up to six percent of the sale price of the home toward closing costs.
This can help a borrower just as much as down payment help depending on circumstances. You must negotiate this with the seller, it is not automatic.
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 by (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 allow 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 (one) mortgage construction lender licensed in your area to contact you. Your credit report will NOT be pulled due to sending this and we do not ask for Social Security numbers.
- 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.
Or go to our site and Request Additional Information.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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