February 17, 2021
If you want to build a dream home on your own lot instead of buying somebody else’s house, the One-Time Close construction mortgage is an option you should explore.
These loans require you to hire a builder (more on that below) and this is a part of the process that can be a bit intimidating for some borrowers until they learn there are some basic steps to follow that will make your hiring process a lot more hassle-free.
Why Hire A Builder?
Why go thru the trouble to find a qualified and reputable contractor to do the construction work for you? Why doesn’t the borrower act as their own builder or hire friends and family to pitch in?
The answer is simple. For a start, most borrowers likely don’t have the expertise or experience to build an entire home from the ground up. Some do, but unfortunately, the general rule of thumb?
OTC lenders won’t let you act as your own contractor. That means you’ll need to use a third party–not a relative or friend–to do the work.
The first place to begin is by asking some simple questions of any company you might be considering to hire as your builder.
Start by asking how long the contractor has been in business and what kind of qualifications the builder has. Can you find a listing for your builder in the Better Business Bureau? Are there complaints registered there? Be sure to ask the contractor how many projects the company has completed in the last year or so. Also, do not forget to ask for references.
Get References, Read Reviews
Don’t hire anyone to do work for you without checking up on their professional references, reading reviews of that contractor’s past work, and getting a good read on the reputation of the company.
You can learn more about any given contractor using the company name via a Google search with that name and keywords like “scam” or “rip-offs”. See what comes up and judge accordingly.
Remember that negative reviews are not always an indication of a ripoff operation–some business transactions wind up in disputes and sometimes a bad review isn’t what it seems to be. But when there are multiple complaints that all have similar details that’s a potential warning sign.
Always Ask
Ask whether sub-contractors will be used. There are good reasons to ask–you’ll definitely want to know about insurance coverages the subcontractor carry as well as what insurance the contractor themselves carry.
In any case, when it comes to One Time Close construction loan work, builders and sub-contractors should have personal liability insurance, worker’s compensation, and property damage insurance.
Ask about the contractor’s policies for site cleanup; trash hauling, dumpster management, dealing with spills or other problems on the job site. Remember that unless you get promises IN WRITING, you may have difficulty enforcing them.
Get all promises or guarantees in writing and keep copies for your records at all times. You may need them sooner than you think. Even as a just-in-case, this is strongly recommended.
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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