March 27, 2023
You can use a One-Time Close construction loan to build a new home on your own land or land you buy in conjunction with the loan.
This is a good option to think about if you want a house with designs you’ve approved instead of buying someone else’s house.
Getting Your Loan Started
Finding a participating FHA or VA lender, depending on the loan you choose is an integral part of the construction loan process.
You should also know that construction loan mortgages require higher FICO scores and more time before move-in than a typical home purchase loan. But the end results are worth it.
But just as important? Finding the right builder.
One-Time Close loans don’t allow the borrower, builder, relatives of the buyer, etc . to act as contractors.
You are required to select a builder who can submit certain documentation requirements your contractor will have to meet to be approved to work on your home.
Submission of the builder’s licensure and credentials, and certificates of insurance (including both general liability and Workers’ Compensation) must all happen as a condition of loan approval.
Down Payment Requirements
Some borrowers want to save as much out of pocket as possible ahead of a home loan, but making a bigger down payment can help lower the long-term cost of your mortgage.
For FHA One-Time Close Construction loans and VA OTC loans, there is no penalty for early payoff of the mortgage. Whatever you decide, there are some lender standards you may find typical with this type of home loan.
One-Time Close loans generally–due to those lender standards–do not permit down payment assistance programs.
Like any other home loan your down payment must meet program standards–it must come from approved sources and cannot be sourced from non-collateralized loans such as payday loans or credit card cash advances.
Before You Apply
Even if you feel ready to apply for a home loan, it may make sense to wait in some cases.
Why might you want to delay an application until conditions are right?
If you have applied for bankruptcy but you have not had more than 24 months pass since your bankruptcy is discharged, you will need to wait until you have had 24 full months pass since the bankruptcy was discharged.
NOT 24 months not since the FILING date.
You should also wait if you have had a 30-day late payment in the last 12 months. Wait to apply for the loan until you have a record of all payments made on time, every time, for at least 12 months ahead of the loan application.
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.
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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