January 25, 2018
FHA loan options for buying new construction homes include the FHA One-Time Close / Single-Close Construction Mortgage, which allows a borrower to apply once and have a single closing date for a house built from the ground up.
FHA One-Time Close mortgages differ from other construction loans because this type of construction loan eliminates the two-step construction loan application process where the borrower applies once for the costs of construction, and has a closing date for that loan, then applies a second time for the mortgage on the property itself.
It’s definitely an advantage to have a single application and closing date. But what are the other options to compare this type of loan to? It’s good to know what you can get from multiple options-making an informed choice to build a home using a One-Time Close loan is definitely the best thing to do.
FHA New Construction
HUD 4000.1 has a set of criteria which defines what type of FHA home loan you may need to apply for. There are loans for existing construction homes, and new construction. The phrase “new construction” can refer to one of three basic types of circumstances. From HUD 4000.1:
–Proposed Construction refers to a Property where no concrete or permanent material has been placed. Digging of footing is not considered permanent.
–Under Construction refers to the period from the first placement of permanent material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.
–Existing Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or equivalent. The Property must have never been occupied.
Other Home Loan Options
Some borrowers want a home that is built for them, from the ground up. This can happen with an FHA One-Time Close loan, which is also referred to as a construction-to-permanent loan. But there are also those who don’t have a priority on having a home built especially for them-a house that has never been occupied is perfectly acceptable.
There are FHA home loans available for these properties, which are technically classified as “new construction” but with a sub-classification (as described above) of properties “existing less than one year”.
FHA construction loans may also be available (depending on circumstances) for the assembly of manufactured housing (including the cost of the unit and all on-site installation expenses, according to HUD 4000.1).
In all cases, the borrower has an FHA loan option for these new construction housing types. New construction loans may have higher FICO score and credit history requirements, and the process for buying and having the home built are more complex than for purchasing existing construction properties that have at least one previous owner.
Speak with a loan officer to determine what kinds of construction loans may be popular in your housing market, or to learn about FICO score requirements and loan approval timelines.
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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