March 18, 2021
If you have never explored your options to build a house on your own lot with a One-Time Close construction loan, you might be surprised to learn that these loans are open to first-time borrowers and experienced home owners alike.
Construction loans have great advantages for those who want to build a primary residence. But there are often important questions borrowers need to be answered before they can make an informed decision on building on their own lot.
VA One-Time close mortgages for military members and veterans offer a no downpayment option, and FHA One-Time Close mortgages have a low 3.5% downpayment requirement. And the down payment issue is where we get started with our home loan advice.
Down Payment Assistance For Construction Loans
Most FHA and VA participating lenders will not permit down payment assistance on a One-Time Close construction loan. The borrower is expected to be able to financially cover all the costs of the loan including the down payment, so if you have concerns about money down, it’s crucial to start saving early.
Qualifying Credit Scores For One-Time Close Construction Loans
If you have good to excellent credit, your scores are right for a One-Time Close mortgage. Basically that means scores within a range of the mid 600s or better. Each lender may have different standards in this area.
VA loan rules have no minimum FICO score listed for loan approval and FHA loan rules specify a minimum FICO score range of 580 or higher for the lowest down payment.
However, your participating lender for both VA and FHA mortgages will have higher-than-minimum requirements, especially for construction mortgages.
First-Time Home Buyers Qualify For A One-Time Close Construction Loan
There is no FHA requirement to be a first-time home buyer OR an experienced home owner. You can be approved for a construction loan in either case if your credit scores, income, and other factors qualify.
Borrowers are required to occupy the home you build with your construction loan–these loans are for owner/occupiers and not for investment property.
Do You Own The Land You Want To Build A Home On?
Construction loan applicants who own the land they wish to build on should have a conversation with a lender about using the equity in the land for the construction loan down payment. Depending on circumstances you may be able to skip the down payment altogether if you have enough equity.
Who Can Be The Contractor On A Construction Loan?
Your lender will not allow you to act as your own builder and you will need to show paperwork proving the crews you do hire are properly credentialed. These rules are usually non-negotiable.
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.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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