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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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November 12, 2019
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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

FHA One-Time Close Mortgage Interest Rates

November 5, 2019 - Why do borrowers who want to build a house on their own lot turn to an FHA One-Time Close construction loan instead of conventional construction loans? Perhaps for reasons that include a lower mortgage loan interest rate and a lower down payment requirement.

FHA and VA Construction Loan Benefits

October 29, 2019 - For some borrowers, the advantages of FHA and VA construction loans include being able to design a home to a specific need or plan, especially if the house hunter needs to install features not considered common among the available home sales in the area.

Build a House on Your Own Land With an FHA Loan

October 28, 2019 - You can build on your own lot using an FHA mortgage, even as a first-time home buyer. You will get the same 3.5% down payment minimum on an FHA construction loan as you would buying existing construction real estate.

FHA Texas One-Time Close Construction Loans

September 20, 2019 - FHA One-Time Close construction loans are an important option to consider for those looking for a home in Texas. That market is an excellent place to consider building a home from the ground up with a One-Time Close (OTC) mortgage.

Are You Ready for an FHA One-Time Close Construction Loan?

September 15, 2019 - There are important things to consider before you start discussing your needs with a participating FHA lender, and coming into this mortgage loan process fully prepared will definitely save you a great deal of time.

What Kinds of Houses Qualify for an FHA Loan?

August 20, 2019 - What kinds of houses qualify for an FHA home loan? The answer may surprise you since many people assume the types of homes they can buy are fully finished, typical suburban home. But you can purchase other types of properties, too. Do you know your options with an FHA loan?

One-Time Close Construction Loan Planning

July 28, 2019 - It’s true that even first-time home buyers can apply for an FHA One-Time Close construction loan to have a house built for them from the ground up. You don’t need to be an experienced homeowner to do this, but you’ll need to anticipate some required expenses for your new home.,

One-Time Close Construction Loans: Build Or Buy?

July 16, 2019 - The One-Time Close construction loan, an option for FHA loan applicants, VA loan applicants, and USDA borrowers, offers the ability to have a home built from the ground up. Is this the right choice for you? Some borrowers have a sense of urgency about getting moved into a new home.

FHA Forward Mortgage Loan Options

July 5, 2019 - An FHA forward mortgage allows the borrower to apply for funds to purchase the home, with options to finance the Up-Front Mortgage Insurance Premium and certain approved, appraiser-required corrections where applicable.

One-Time Close Construction Loans in Texas

June 20, 2019 - FHA / VA / USDA One-Time Close construction loans are an important option to consider for those looking to build  a new home in Texas. Texas home values have gone up 5.6% over the past year and Zillow predicts they will rise 4.0% within the next year.

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