July 27, 2020
There are home loans for borrowers–even first-time home buyers–to allow the construction of a home from the ground up. They are called One-Time Close construction loans and are available from participating FHA, VA, and USDA lenders.
One Time close loans, also known as single-close construction loans, feature one loan for both the construction of the home and the purchase of that home.
When you apply for a construction loan, one area you’ll soon learn about is something called the base home sales price. This is essentially the base cost of the project using the contractor’s standard designs and features–you choose the design and features and those choices generate a base price.
Choosing Features, Materials, Design
How do these choices affect cost? Consider the design itself. What is the cost of building a home with a two-car garage versus building a home with a single-car garage?
Will you have a basement? If you want a fully finished basement your labor costs may be higher–these are the variables you should consider when thinking about the type of home you want to build on your own lot.
There are also materials to decide upon; do you want to build your home with granite counters? Or do you want synthetic materials instead? These are choices that will affect your base price–a price that is more or less a collection of choices you will make about the home in these areas and elsewhere.
How Your Project Is Charged May Vary
Not all One Time Close contractors offer or charge for features in the same way; some companies have standard offerings but offer upgrades such as the option of choosing granite countertop over less expensive laminate countertops instead.
You may also be offered a variety of options for one-story, two-story, split-level, or other design features.
There will be adjustments to the base sales price depending on the features you prefer–understand that the more upgrades you have, the higher your base costs will be. And there are some expenses that may not make it into that calculation that you may need to contend with.
Unexpected Costs
The base home sales price will not include unexpected costs, or “site expenses” that may occur during construction. If there is trouble excavating the ground for a basement, for example, there may be delays resulting in higher costs that could not be anticipated. These site costs are not included in the base home sales price.
When breaking down the expenses for an OTC mortgage, the base home sales price is listed along with any seller-paid costs, the interest expenses over the construction period, and soft costs associated with construction. But the unexpected costs (if any, where applicable) cannot be anticipated ahead of time.
For One-Time Close mortgages, all of this might make the entire proposition sound quite expensive, especially up front where the down payment is concerned. But even for a One-Time Close construction mortgage offered to a first-time home buyer, the down payment requirements are the same for the FHA OTC loan as for FHA purchase loans–3.5% is the minimum down payment.
You can see that makes the OTC loan (especially the FHA version) quite attractive for qualifying borrowers. Remember, FHA mortgages are open to all who financially qualify–FHA loans do not have income caps or require you to be in financial need.
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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