February 12, 2021
How do One-Time Close Loans differ from other mortgage types? There are FHA One-Time Close loans, VA construction loans, and USDA versions. How do the construction loans differ from buying someone else’s home?
The first way they differ is time–it takes more time to get the key and move in when you build a home from the ground up than it does to buy existing property. But the time you spend building is worth the investment–you get to approve the design of the home you are moving into, and that’s a big deal for some house hunters.
Build Or Buy?
Deciding isn’t hard for some people–they want the ability to customize.
There are FHA loan options for doing so that don’t require you to commit to building from scratch–some choose to purchase a fixer-upper and modify an existing home using an FHA 203(k) Rehabilitation mortgage.
But with a One-Time Close construction loan, you have the ability to approve even the basic look and presentation, not just cosmetic features.
A construction loan might not work for some but if your priorities include having more control over the design and you are able to wait out the construction process to get your home just right, the One-Time Close loan may be the right mortgage for you.
Getting The Loan
FHA One-Time Close loans feature differences from how borrowers proceed with existing construction mortgages.
On paper FHA loan requirements for One-Time Close construction loans are no different than any other FHA mortgage. Borrowrers are informed about the minimum down payment of 3.5% on the loan, there is a minimum FICO score requirement for maximum financing, a different FICO score requirement for those with lower scores but who still qualify for a loan with a higher down payment.
You may find that FHA lenders require a different FICO score approval range for construction loans than for existing construction. That’s a good reason to look at multiple lenders for your home loan. Is your current financial institution offering you the best deal? Or can you get better terms elsewhere?
Another issue to consider—FHA lenders may permit you to apply for a mortgage loan using down payment assistance. But for construction loans your lender may say you cannot use any down payment grant programs.
A Construction Loan With No Down Payment?
One-Time Close loans have a potential benefit for any borrower who already owns the land the property will be built upon. Ask your lender about skipping the down payment in favor of using land equity, which is an option you do NOT have if you are buying existing construction.
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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