July 19, 2020
What do borrowers need to know about FHA One-Time Close construction loans? There are two very important areas to keep in mind. One involves the lender’s specific requirements to qualify for this single-close construction loan, and the other involves FHA loan rules.
The two are not always identical and this is something to be aware of when going into the loan application process.
FHA One-Time Close mortgages are different than existing construction loans because the home must be designed, built, and paid for from the ground up and there are varying time frames under which this will be done.
Purchasing an existing construction home means getting to move in much more quickly, but the trade-off is that you are purchasing someone else’s home rather than having one built especially for you.
FHA One-Time Close Loan Requirements: Number Of Units Allowed
The FHA standards for One-Time Close or OTC construction loans includes the ability to apply for a loan to finance the construction of a multi-unit property. Under FHA loan guidelines you are permitted to apply for a loan for primary residences with as many as four living units.
Lender Requirements For FHA One-Time Close Construction Loans: Living Units May Be Restricted
Some participating lenders may not approve FHA OTC construction loans for projects involving more than one living unit. Be sure to ask your loan officer whether you can get approved for a mortgage on a construction project with more than one living unit.
FHA Loan FICO Score Standards Versus Lender Requirements
Like most other FHA mortgages, FHA One-Time Close construction loans have FHA minimum FICO score requirements (580 or higher for maximum financing and the lowest down payment) but the lender’s standards are usually higher.
You may find that for OTC loans, lender FICO score requirements may trend higher than for existing construction loans. In some cases the lender may also have additional credit history requirements such as no late payments or missed payments of any kind on housing-related payments (rent or mortgage) within a certain span of time leading up to the mortgage.
Be sure to ask your lender how their standards may vary from the FHA minimums.
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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