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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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FHA.com is a privately owned website, is not a government agency, and does not make loans.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

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 [email protected]. 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

Home Construction Mortgage Options: One-Time Close Loans

December 30, 2020 - If you want to build a home on your own land or on land you buy in conjunction with your construction loan, you should know there are a variety of construction mortgages out there and  not all of them are the same.

Building a Home Instead of Buying

December 23, 2020 - FHA One-Time Close construction loans are good for borrowers who aren’t worried about being able to qualify for the home loan with their FICO scores. Be sure to discuss the timing of your mortgage payments with your loan officer.

FHA Home Loan Options for 2021

December 18, 2020 - If you are interested in buying a home in 2021, you have higher FHA home loan limits to look forward to. You also have a range of FHA home loan options you should seriously consider that can provide alternatives you might not be aware of.

FHA One-Time Close Loans: Program Changes in 2021

December 15, 2020 - The FHA and HUD have announced changes to the FHA One-Time Close program in 2021--changes which formalize certain elements of the program modified by Final Rules and other procedures. There are alterations to its maximum financing policy as well as modifications  in other areas. 

FHA Modifies New Construction Loan Guidelines

October 27, 2020 - On October 22nd, 2020, the FHA and HUD announced changes to the FHA loan rules for new construction loans, which are used to build a home rather than having the borrower buy an existing property previously occupied by the former owner.

Should You Build a Home or Buy a Home?

October 6, 2020 - Build a home on your own land using a One-Time Close construction loan or buy an existing property? There are some questions to ask yourself about your financial needs and goals that could change your mind about choosing one path or the other.

Buying or Building a Home: Credit Checklist

October 3, 2020 - Are you interested in buying an existing home or having one built for you on your own lot? Before you apply for a mortgage, there are some important credit issues you’ll want to address to improve your chances at home loan approval.

Introduction to VA One-Time Close Construction Mortgages

September 24, 2020 - While VA construction loans don’t require a down payment in most cases, borrowers with FICO scores that would require money down will be required to provide the funds without outside assistance. The same is true of those who don’t have to make a down payment but choose to do so anyway.

FHA One-Time Close Construction Loan Rules for Purchasing Land

September 14, 2020 - What are the FHA loan rules for buying land as part of a construction loan? Not all borrowers own their own land. Ehen you want to build on your own lot, you may need to purchase the lot as part of the loan.

VA One-Time Close Construction Loans: When Mortgage Payment Start

September 6, 2020 - The VA loan benefit includes the ability to build a home on your own land using a VA One-Time Close construction loan. VA One-Time Close loans allow you to build a house on your own land or purchase land in conjunction with building a home.

SEE YOUR CREDIT SCORES   From All 3 Bureaus  

Do you know what's on your credit report?

Learn what your score means.


GET STARTED