March 2, 2021
If the idea of building a home instead of buying somebody else’s property appeals to you, the One-Time Close construction loan allows you to build a home from the ground up on your own lot (or on land you buy in conjunction with the mortgage).
Building a home with plans you approve has plenty of advantages, but it also requires some extra consideration. It’s not terribly complicated to anticipate some important factors associated with your construction loan but it does take some time to get the information you need to make the most informed choices possible for your new home.
If you want to build a home on your own lot instead of buying an existing house, the FHA One-Time Close construction mortgage is an option you should seriously consider. FHA construction loans feature the same low down payment requirements (3.5% down for qualified borrowers) as any other FHA mortgage.
You do not have to be a first time home buyer to qualify and your participating FHA lender can advise you on additional options for your home loan such as applying for an Energy Efficient Mortgage (which adds money to the loan for energy saving features in the home). Here’s some advice for anyone considering building a home from the ground up with a One-Time Close mortgage.
Consider Your Timeline
It’s never a good idea to be in a hurry when construction is involved (see below), but one aspect of building some overlook in addition to allowing the right amount of time for completion?
Planning to start the project at the right time. If you live in an area known for having seasons of extreme weather, it may not be wise to start your construction project at the beginning of such a season. Others may not have to worry about weather issues at all. But these are factors that can and do affect a construction project and it’s best to anticipate them.
Plan On Needing Additional Time
When building a home from the ground up, smart planners assume the schedules they have worked so hard to create will not run as planned. All building projects run long, it’s a fact of life. Don’t be in a hurry with a construction loan unless you enjoy stress.
It’s also a very good move to add more time than you think you need in the planning stages to find a design you really want. You’ll want to research costs for both the look and location of your home.
Choosing The Right Features
If you build a home, you have to make choices about a lot of things people take for granted. Some aren’t very choosy about countertops, trim, windows and window treatments, etc.
But others want to customize the home a lot more; do you want granite countertops in your kitchen and bathrooms? It is important to take the time to price these features; compare those prices to less expensive, middle-of-the-road type alternates. The costs associated with some features in the home may make you think twice about how you approach aesthetics in the new home.
You’ll Need To Choose Appliances
What we just discussed above for countertops and other design features? Appliance selection is an area where your preferences matter, too. Some will insist on top-of-the-line selections for the fridge, freezer, washer/dryer, etc. Be sure to compare the costs of these models to mid-grade appliances and see what your selections do to the overall cost of the project. If the price is less important than having just the right selections, you’ll at least want to anticipate how much more the loan will cost as early as you can.
Landscaping Costs
Landscaping is not necessarily associated with the loan costs for building your new home. But landscaping is an expense you will have to anticipate. Don’t overlook this when planning for your new home, it’s a cost that will need to be met one way or the other.
When saving up for your down payment and other costs, think ahead and set money aside for issues like this that aren’t covered necessarily by the mortgage itself, but do affect your budget. Setting some extra money aside for these costs will help ease the financial burden.
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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