February 4, 2020
You can build a house from the ground up using a One-Time Close construction loan; many borrowers want to take advantage of these types of loans as the government-backed versions of the One-Time Close construction loan feature very low down payment requirements and the same financial qualification rules as other VA or FHA mortgages.
One Time Close Myth: I Can’t Afford To Build A Home Instead Of Buying One
It’s easy to assume that building a home will cost you more money than buying an existing construction property. But what kind of home do you need? Are you building a house to start a family in? Or are you building a home that you want to retire in?
The overall cost of your project will depend on details like these, but you don’t have to include costly features such as an extra living unit (some lenders won’t approve multi-unit construction loans regardless, so this would not be an issue in such cases), and you can also apply to have additional funds included in the loan for money-saving energy-efficient features in the home.
Remember, construction loans allow you to have a say in the design of the property, and “going green” is a concern for many. One advantage you have in building instead of buying? Knowing how energy efficient and environmentally friendly your new home is based on what you decide on the design.
One-Time Close Loan Myths: Only For Certain Home Buyers
Some people assume they could not qualify for an FHA construction loan or a VA construction loan because they are not first-time home buyers. This is not true.
FHA construction loans are open to any financially qualified borrower (FHA credit score requirements state FICO scores 500 or above typically qualify under FHA guidelines, but lender standards also apply).
If you have FICO scores that meet both the FHA and the lender’s standards, you may be able to qualify (assuming your other financial qualifications meet lender requirements) for a construction loan the same as with any other type of FHA or VA mortgage.
(Remember, we mention VA loans in this article as a reminder that military members, veterans, and qualifying surviving spouses of military members may be eligible for a VA mortgage, but VA loans aren’t open to the general public.)
One-Time Close Myths: Higher Down Payments Required
One-Time Close loans have the same down payment rules (VA and FHA) as for any other type of new purchase home loan backed by the VA or FHA. A higher down payment is not automatically required just because you want a VA or FHA construction loan and not a different VA or FHA loan product.
Some home loans do require higher down payments due to circumstances such as the asking price of the home being higher than the appraised value, but in general down payment issues for FHA and VA construction loans are similar to existing construction loans.
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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