May 8, 2018
How do VA One-Time Close / Single-Close construction loans compare to their FHA One-Time Close (OTC) / Single-Close counterparts? If you don’t know which program you qualify for, now is a good time to learn the differences and similarities.
FHA And VA One-Time Close / Single-Close Construction Loans Requirements
Some things will apply to both FHA and VA One-Time Close construction loans. For both types of loan, all borrowers must financially qualify, they must have minimum FICO scores as determined by both the VA/FHA and the lender, and the property must be constructed in the United States or its’ protectorates.
VA One-Time Close and FHA One-Time Close loan rules both require occupancy; you may only have a home built from scratch using a VA construction loan if you intend to be an owner/occupier.
VA and FHA construction loans will be affected by VA loan limits / FHA loan limits. Ask your loan officer about maximum amounts of construction loans in your area as well as how your project might fare compared to similar types of construction loan projects in that housing market.
You may be able to use a construction loan in conjunction with other VA or FHA home loans such as the VA Energy Efficient Mortgage (which provides extra funds for approved energy saving upgrades). Ask your loan officer what may apply for your project.
FHA One-Time Close / Single-Close Construction Loan Requirements For Down Payments
Unlike the VA One-Time Close program which, under VA loan rules, permits a borrower to make a no-money-down purchase, FHA construction loans will require a minimum down payment of 3.5% for all transactions considered a new purchase loan. Construction loans are no exception.
Construction Loan Down Payment Issues
VA borrowers who do choose to make a down payment will enjoy benefits that include a reduced VA loan funding fee for their construction loan. The amount of that fee will change depending on the size of a VA home loan down payment-talk to your loan officer about how to reduce that fee with the right size down payment. FHA loans do not have this feature.
As always, participating lender requirements may apply above and beyond FHA loan standards. Ask your lender what down payment requirements may affect your construction loan transaction.
VA One-Time Close / Single-Close Construction Loan Fund Fee Requirements
The VA One-Time Close construction loan program requires payment of the VA loan funding fee not be tied to the completion of the labor on the project. It is due at the VA within 15 days of the loan closing date. You will need to ask your lender about timing, amounts, and other factors that may be affected by lender requirements in addition to VA loan rules.
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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