April 27, 2018
There are two general types of construction loan. One construction loan has two applications and two closing dates, requiring a new credit check for each phase of the loan-the construction itself and the mortgage.
Another type, the One-Time Close / Single-Close construction loan, has only one application and closing date, protecting the borrower from potential complications associated with a second loan application.
There is an FHA One-Time Close loan, but also a VA OTC version of the program and a USDA OTC option available for those in qualifying rural areas. What do these loans have in common with each other?
FHA One-Time Close / Single-Close Construction Loans Versus VA One-Time Close Loans
The FHA and VA One-Time Close / Single-Close loan programs are quite similar. Both require builders on a “registration” list, both require the borrower to use escrow, and neither the VA or FHA construction loan programs allow the borrower to get cash back on the transaction in general except for refunds.
The difference between the VA and FHA One-Time Close programs have a lot to do with who can apply-FHA loans are open to any financially qualified borrower regardless of previous home buying or home owning experience.
There is no income cap for FHA loans, and you do not have to be financially disadvantaged to use the program.
VA One-Time Close construction loans are open only to qualified borrowers who have served a minimum time in uniform as a member of the United States military.
The general public is not able to apply for a VA construction loan, but eligible veterans and certain qualifying surviving spouses of military members can. Talk to a loan officer about your VA home loan eligibility if you want to explore your One-Time Close options as a VA loan.
USDA One-Time Close / Single-Close Close Construction Loans
The USDA version of the One-Time Close construction loan is different than the FHA version because USDA construction loans are available only in qualifying rural areas.
There may be income restrictions for this type of loan, and borrowers should know the income requirements will vary depending on zip code and other factors. USDA OTC Construction loans, similar to FHA One-Time Close loans, require a builder’s warranty.
The USDA technically permits single-family homes, manufactured housing, and condo projects. However, lender requirements may also apply and the type of dwelling you wish to build may be limited to stick-built housing or to certain number of living units depending on the lender, state law, and other factors.
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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