Articles Tagged With: FHA One-Time Close Construction Loan

May 25, 2018

FHA Home Loan Rules For New Construction Appraisals

Borrowers who are interested in having a home built for them from the ground up using an FHA construction loan such as an FHA One-Time Close mortgage or any other type of FHA-guaranteed mortgage loan may wonder what the rules are for appraisals. After all, existing construction appraisal processes are for a home that is ready to sell (although the process may vary if the borrower is applying for certain types of rehab loans). While the appraisal requirements may be generally the same-the home must be safe, habitable, and have an economic life for the entire duration of the mortgage-there are procedural issues that affect new construction properties. With that in mind, appraisals on new construction run a bit differently in some procedural ways than existing construction mortgages; with the | more...

May 24, 2018

FHA Loan Rules For Property Types

By Joe Wallace

FHA loan rules in HUD 4000.1 spell out the rules for approved property types that can be purchased or built using an FHA mortgage. Some borrowers may not realize they can buy, build, or refinance properties aside from the typical suburban home. The list of property types you can choose from include mobile homes, manufactured housing, condos, town homes, row houses and more. Specifically, HUD 4000.1 lists the following: detached or semi-detached dwellings Manufactured Housing townhouses or row houses individual units within FHA-approved Condominium Projects Borrowers can use an FHA One-Time Close construction loan to build a home, but there are restrictions on the type of dwelling you can build. In general homes built using these loans must be single-family residences and not multi-unit properties; your lender will explain what | more...

May 22, 2018

Is U.S. Citizenship Required For An FHA One-Time Close Construction Loan?

By Bruce Reichstein

Is United States citizenship required for an FHA One-Time Close / Single-Close construction loan? This issue does not affect all potential FHA borrowers, but it’s a very important one to address, especially given controversy in the news over a variety of societal concerns. Before we get to the specifics of whether or not citizenship is required for an FHA One-Time Close / Single-Close mortgage or ANY type of FHA home loan, refinance loan, or FHA reverse mortgage, it must be noted that FHA home loans are approved on the basis of a borrower’s ability to financially qualify and afford the mortgage. The borrower must be able to legally commit to binding agreements including the loan contract itself, and be of sufficient legal age in the state the transaction is to | more...

May 21, 2018

FHA Loans, Wells, And One-Time Close Construction Loans

By Bruce Reichstein

Borrowers who apply for FHA loans may not be clear on whether or not a property served by a well instead of being connected to the local utility is eligible for an FHA mortgage. Is the presence of a well a problem for FHA loan approval? And what about FHA loan standards for FHA One-Time Close / Single-Close construction loans? HUD 4000.1 contains guidelines for these issues including the acceptability of a property served by a well instead of a water utility. Borrowers will be relieved to know that FHA mortgage rules do not automatically rule out a property just because a well is present, but that well must meet both FHA minimum requirements and any applicable health code or other local ordinances. For One-Time Close / Single-Close construction loans, | more...

May 21, 2018

FHA Loan Rules For Investment Properties

By Joe Wallace

Admittedly, the title, “FHA Loan Rules For Investment Properties” might sound a little misleading; the FHA lender’s handbook HUD 4000.1 states clearly on page 142, “Investment Properties are not eligible for FHA insurance.” But what is the FHA definition of an investment property? The answer to that question is twofold-to understand what constitutes an investment property, we have to examine what is NOT an investment. What is the type of home loan the FHA does guarantee? FHA mortgages are primarily for owner-occupiers. At least one borrower obligated on the mortgage must live in the home as her permanent, principal residence within a reasonable time after the loan closes. In some cases, FHA loan rules make provisions for borrowers who want to use an FHA loan for a secondary residence, but | more...

May 18, 2018

Maximum Loan Amounts For FHA One-Time Close Construction Loans

By Bruce Reichstein

What is the maximum loan amount you can borrow with an FHA One-Time Close / Single-Close construction loan? The actual dollar amount is not fixed, it depends on variables including the FHA loan limits in a given housing market and whether or not the borrower is buying land in conjunction with the project. Calculating the Maximum Loan Amount For An FHA One-Time Close / Single-Close Construction Loan The FHA loan rules for One-Time Close / Single-Close loans, also known as construction-to-permanent mortgages, are found in HUD 4000.1 and include a breakdown for lenders on how to calculate the maximum mortgage loan. The loan limit takes into account the borrower’s down payment and the Loan-To-Value ratio (LTV). HUD 4000.1, page 445 instructs the lender: “The maximum mortgage amount is calculated using | more...

May 18, 2018

FHA One-Time Close Construction Loans: What’s Required At Closing Time

By Bruce Reichstein

In addition to the usual requirements to close, FHA One-Time Close / Single-Close construction loans (FHA OTC) have some additional FHA documentation requirements borrowers should anticipate. One Time-Close construction loans are more complex than existing construction loans for a few obvious reasons-when a borrower has a home built from the ground with an OTC loan, builders must be paid, there are escrow requirements and procedures which must be followed, and there are unique requirements for this type of loan. Do you know what additional documentation may be required to close the deal? According to page 446 of HUD 4000.1, the FHA loan handbook, the additional documents to close include (but are not limited to) a construction rider, a disclosure agreement related to final inspections, a fully executed contract between the | more...

May 16, 2018

FHA One-Time Close Construction Loans And Other Government-Backed Mortgages

By Bruce Reichstein

House hunters looking for government-backed mortgages (as opposed to conventional mortgages which may have higher down payment requirements and other features) have a variety of options to choose from. Are you in the market for an FHA construction loan such as the FHA One Time Close construction mortgage? Do you need to build instead of buy? FHA One-Time Close / Single-Close Construction Loans Borrowers who choose the FHA One Time Close / Single-Close mortgage are applying for a single mortgage loan covering both the construction phase and the mortgage itself. These loans are for those who want to build a home from the ground up, and there are additional requirements for these loans regarding escrow, inspections, and when mortgage payments are scheduled to being. One Time Close (OTC) loans or | more...

May 11, 2018

Do You Need An FHA Home Loan?

By Joe Wallace

Do you need an FHA home loan? There are many mortgage loan options on the market, do you know what makes an FHA mortgage a potential advantage as a home buyer? FHA Home Loans Have More Forgiving Credit Requirements FHA mortgages have minimum FICO scores and credit history requirements that can be more forgiving than their conventional loan counterparts. Lender standards will also apply, but the FHA-proscribed minimums allow the lender greater flexibility to consider loan approval. FHA Loans Have Lower Down Payment Requirements 3.5% of the adjusted value of the property for new purchase loans on existing construction homes is quite appealing for many borrowers who can’t afford 20% down for some conventional loans. FHA One Time Close construction loans also require a 3.5% down payment for properties built | more...

May 9, 2018

One-Time Close Mortgages: Choices To Consider

By Bruce Reichstein

There are many options to consider when planning a One-Time Close (OTC) / Single-Close construction loan. Borrowers who want a home built for them from the ground up can choose between FHA One-Time Close, USDA One-Time Close, and VA One-Time Close construction loans. These are also known as Single-Close loans. These three programs have some basic differences. VA OTC mortgages allow qualified borrowers to apply with no money down. USDA construction loans may also permit the borrower to apply without the expectation of a down payment, but these construction loans are only for rural areas with populations of up to 35,000 according to a 2017 USDA fact sheet about the program. One-Time Close / Single- Close Construction Loans: Occupancy Required Choices between the VA, USDA, and FHA construction loan program | more...