November 12, 2018
FHA One-Time Close construction loans, also known as construction-to-permanent mortgages, are a way that borrowers who need a lower down payment and more flexible loan approval guidelines can apply for a home loan that allows the property to be built from scratch.
One-Time Close loans, which are sometimes referred to as FHA OTC mortgages, require the borrower to qualify only once for both the construction portion and the mortgage loan.
This type of FHA mortgage may vary more among participating lenders because of certain features of the loan including the type of property that can be built, and the loan approval process as it relates to getting construction permits for the project.
Some Options Are Available With Some Lenders But Not Others: Shop Around!
Your participating lender may not offer these construction loans for modular or manufactured housing even though FHA guidelines permit it. Some lenders in some housing markets may warn borrowers to start early because construction permit approval times may be much longer than in other markets.
But the extra time can definitely be worth it. Having a home built to suit means the borrower has much more of a say in the nature of the home with regard to certain features, the types of appliances that may be installed, exterior features such as siding, paint, etc.
What are some of the benefits of applying for an FHA One-Time Close construction loan?
More Lenient Qualifications
This is true of the FHA home loan program in general. For OTC mortgages lenders may have more strict FICO score requirements and other qualifications than for other home loan products. FICO score requirements may actually be lower for existing construction loans depending on the lender-be sure to ask your participating FHA lender about how FICO score requirements may vary for this type of mortgage.
Lower Interest Rates
Remember, your FICO scores are an important factor in the interest rates you are offered, but in general most FHA mortgages feature lower “best execution” credit score ratings than their conventional counterparts. Your mileage may vary depending on your credit qualifications but overall, FHA borrowers can expect to favorably compare FHA rates to conventional loans.
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.
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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