August 17, 2020
Are you thinking about buying an existing home? Are you considering applying for a construction loan to build a house on your own lot instead?
If you are trying to decide whether to build or buy, there are questions to ask before you commit to buying an existing construction property, or choose to apply for a One-Time Close mortgage to build on land you already own or purchase as part of the mortgage.
What does it take to select the best option for your needs? There is an advantage to building a home from scratch–borrowers can influence the final outcome of the construction and help determine the nature of the house ahead of time.
Some don’t enjoy sorting out such details, they gravitate toward the idea of looking at existing homes instead. Have you made up your mind yet? Here are some good questions to ask.
The Future Of Your New Home
Do you plan to sell your house in a few years, or do you plan to stay in your home for a long time? An officer about to retire from the Air Force, for example, might be looking for a permanent home and building that home from the ground up (instead of buying an existing house) may be the best choice.
But what about a new family expecting to add another member at some point down the line? They may be purchasing a home knowing they will sell in a few years and move on to find a house that will be big enough for their changes in their family size.
For borrowers like these, buying an existing home may make more sense than having a house built to suit.
How Soon Do You Need To Move?
When applying for an FHA One-Time Close (OTC) construction loan, you should not be in a hurry–construction loans require the borrower take their time.
The home built with an OTC loan (FHA and VA options exist) will have a design you approved but the process–building the house, getting the inspections, and taking possession of the home–may take longer than buying existing construction. Don’t be in a hurry with a construction loan.
And for many borrowers (even first-time home buyers can apply for an FHA or VA construction loan) don’t mind the wait thanks to the trade-off of getting to approve the design.
If you need to move into a new house soon, consider your options with an FHA purchase loan, (the 203(b) loan which is the “standard” FHA mortgage for an existing construction house), and you can also apply for an FHA condo loan, a mobile home loan, modular home loan, etc.
Design Or Location?
For some, location is not a serious issue, but for others–especially new families who need essential services–feel location is one of the most important parts of the decision-making process.
If you need to buy a home located close to child care, elementary schools, healthcare, or other concerns, the question of whether to build or buy may depend greatly on whether the home you need is where you need it.
Buying a home involves many choices–discuss your needs with a participating FHA lender and learn what your best options are based on your financial needs and goals.
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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