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FHA construction loans may be used to finance construction of a one- to four-unit residence through a Construction to Permanent Mortgage through the FHA One-Time Loan Program. It's one of the best products on the market that very few people fully understand.

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January 21, 2019
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FHA One-Time Close Construction Loans

10 Reasons a Home Builder Can Benefit

Since its inception in September 2001, FHA.com has become a valuable tool for news and information pertaining to FHA mortgage products. Our site offers knowledgeable FHA lenders who specialize in FHA lending the ability to connect with potential customers in need of FHA mortgage loans. These fully licensed lenders offer complimentary pre-approvals to their customers in the comfort they need to shop for their home with confidence.

In our constant desire to find trends within the FHA home purchase market, we have done some extensive market research on the FHA One-Time Close Construction to Permanent Loan product and wanted to share our findings.

FOR HOMEBUYERS

Here are the top 10 reasons a buyer would choose to build a new home rather than buy a resale home:

  1. The buyer can design and build a brand-new home versus a resale with the same FHA credit requirements and low 3.5% required down payment.
  2. Gifts are allowed for 100% of the needed 3.5% required down payment.
  3. Up to 6% seller/builder contribution for borrowers’ closing costs & prepaids.
  4. Credit scores can be as low as 620.
  5. FHA offers more flexible underwriting requirements with relaxed debt ratios.
  6. No reserve requirement.
  7. The buyer makes no payments until construction is complete.
  8. The permanent FHA loan closing is done one-time before construction begins.
  9. No re-qualifying or document updates needed whatsoever.
  10. Interest rate is protected during construction.

FOR BUILDERS

We spoke with many mortgage companies who have years of experience and have closed these FHA One-Time Construction Loans. We found that the FHA One-Time Close Loan is one of the best products on the market that very few people know about. While there are many educated and knowledgeable loan officers and /or companies that offer this product, there are only a select few that truly understand the entire process. We have written several articles about the FHA One-Time Close product and gave our visitors the ability to be put in touch with a licensed FHA One-Time Close lender in their area.

The response has been excellent during our 6-month test pilot. We successfully matched 200+ qualified OTC leads who desired to be matched with one knowledgeable lender in their jurisdiction. The feedback on the quality of the potential borrowers was excellent, yet in most cases, the borrower still had not found a lot and/or an approved FHA builder.

For example, a qualified couple desired to build a new home in Las Cruces, New Mexico in Dona Ana County utilizing the FHA One-Time Close program. Introductions were made to the licensed lender in New Mexico and the couple were pre-approved. Then the process started for the lender to find a qualified builder willing to work with their client. We are simply trying to expedite the match.

Qualified builders who want to build stick/site build homes utilizing the One-Time Close Program offered by the FHA now have a new avenue for attracting additional clients simply by completing a no-cost form and once approved, giving this financing option to the buyer. So, if you are a builder in Las Cruces, New Mexico, you can sign up to be an approved One Time Close approved builder with one of the largest FHA One-Time Construction Administrative companies in the country.

Once the builder is approved and meets the guidelines set forth by the lenders, the benefits start immediately. The next time our company gets a request for an FHA One-Time Close home loan in Las Cruces, New Mexico, or better yet (the next time a retail loan officer specializing in this product gets a request for an FHA One-Time Close loan in Las Cruces who wants to build, communication to the consumer will include your firm as an approved builder in that jurisdiction. In addition, you will be able to direct future customers who want to take advantage of the FHA One-Time Close to a licensed mortgage banker in your area that has expertise in the One-Time close construction process and can fulfil this loan request. Signing up would be a win/win proposition.

For builders interested in receiving the FHA One-Time Close builder approval form, please send your request to otcbuilder@fha.com. Please include your complete company name, your first and last name, e-mail address, and contact telephone number.

Please note that the FHA One-Time Close Construction Program (investor requirement) only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes).

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FHA Loan Articles and Mortgage News

FHA Loans for First Homes

January 17, 2019 - What should first-time home buyers know about buying a first home with an FHA mortgage? There are several areas to be aware of when comparing mortgage loan products including how your choice of home loan can affect your refinance loan options later down the line.

Are FHA Home Loans Available During a Government Shutdown?

January 16, 2019 - Are FHA home loans, which are government-backed mortgages offered by participating commercial lenders, still available during a government shutdown or partial shutdown? This is an important question and borrowers or potential borrowers should know the facts.

FHA Adjustable Rate Mortgages for 2019

January 14, 2019 - The interest rate on an FHA ARM loan is required to remain constant for an initial period of 1, 3, 5, 7, or 10 years, depending on the ARM program chosen by the borrower. It may then change annually for the remainder of the mortgage term.

FHA One-Time Close Construction Loan Rules for 2019

January 11, 2019 - FHA One-Time Close construction loans are available in 2019 at higher FHA loan limits than in 2018. This is good news for anyone who wants a low-down payment construction loan that features only ONE application and closing date.

FHA Loans, Air-B-n-B, and Rental Units

January 8, 2019 - The sharing economy has made entrepreneurs out of many who never thought of earning income by being an Uber driver or acting as an Airbnb host. Some are tempted to buy a multi-unit home and begin offering it for rent to Airbnb users. Is this possible with an FHA mortgage?

House Hunting and Higher FHA Loans In 2019

January 6, 2019 - Whether you are a single career-minded homebuyer or a new family looking to purchase a starter home, 2019 may be a very good year to apply for a home loan thanks to higher FHA loan limits in most counties nationwide.

Do Higher FHA Loan Limits in 2019 Mean Higher Credit Requirements?

January 4, 2019 - FHA loan limits are going up for the second year in a row. In 2019 your ability to buy a 1-4 unit home gets a boost thanks to the higher limits. FHA loan FICO score requirements and other credit rules of the program will NOT change in 2019.

When Does a Bigger Down Payment Make Sense?

January 2, 2019 - If you’re looking at home loan options, especially for the first time, you might wonder why some buyers choose to pay more out of pocket up front on their mortgage loans rather than making the bare minimum down payment and financing closing costs.

FHA Streamline Refinance Rules to Remember

December 29, 2018 - Are you buying a home with an FHA mortgage loan? Have you already done so? If so, you should know about your refinance loan options with the FHA loan program including refinancing with an appraisal waiver, and no FHA required income check or credit check.

First Time Home Buyer Loan Options - FHA, VA, and USDA

December 26, 2018 - Some first-time home buyers want to know why they should apply for an FHA mortgage when 100 percent VA mortgages and no-money-down USDA loan are available. The reason borrowers often choose FHA over these other home loan programs has much to do with eligibility for the individual type of loan.

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FHA.com Reviews

FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!