April 12, 2018
The FHA One-Time Close / Single-Close construction loan is an option you should consider if you are interested in having a home built for you rather than purchasing an already-lived-in property. Construction loans are different than existing construction loans, and the FHA One-Time Close (OTC) / Single-Close construction loan offers a single application, a single closing date, and more peace of mind for the borrower once the loan has been approved.
FHA One-Time Close / Single-Close Mortgages And FICO Score Requirements
You will have higher credit requirements with an FHA One-Time Close loan due to the higher risk for the lender. Your application may require a FICO score of 620 or higher at the minimum, depending on the lender.
Here’s a sample breakdown of FICO score requirements from one hypothetical lender. Please note that although our lender does not exist in real life, the FICO score requirements below are based on actual lender requirements we are aware of:
- FICO scores between 620-659: A minimum of 2 credit scores are required for all qualifying borrowers.
- Use the middle score if 3 credit scores or the lower of the two if 2 credit scores.
- Lowest representative score from all borrowers will be used for qualification
purposes. - FICO scores at 660 or above: A minimum of 1 credit score is required for all required borrowers.
Note that the FICO score ranges all require the lender to get two or more scores except for the highest range, 660 and above.
FHA One-Time Close / Single-Close Loans And Your Construction Needs
One Time Close loans are designed to pay for labor and materials to get the construction phase of the loan fully completed within a proscribed time frame you’ll work out with the lender.
This type of home loan technically permits the borrower to perform her own labor, but you will find participating lenders may or may not permit this. Some lenders outright forbid the borrower to perform any labor on a One Time Close project, which is quite different than FHA rehab loans where the borrower may be doing her own work.
Some lenders will permit FHA OTC loans for double-wide mobile homes, modular homes, or single-unit stick-built properties. Other lenders will not permit OTC loans for mobile or manufactured homes. You will need to find a participating lender who can work with your specific needs for the construction loan and determine what is possible and how long it may take.
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.
Browse by Date: