FHA New Construction Home Loans: One-Time Close

March 24, 2021

Are you interested in buying a home, but don’t want an existing construction property? Do you want a home built for your or are you interested in a property that has never had a single owner?

The FHA One-Time Close Construction Mortgage allows a borrower to apply once and have a single closing date for a house built from the ground up-a great option to consider for those who don’t want to purchase “already lived-in” property.

Construction loans have traditionally featured two loans-one for the actual construction project including money for labor and materials, and another loan for the mortgage itself. Two applications and two closing dates are required for those types of home loans. It can be intimidating for some borrowers who may worry about loan approval with one or both applications.

FHA One-Time Close mortgages are different. This type of construction loan eliminates the two-step construction loan application process. One application, one closing date, one loan.

Defining FHA New Construction Homes

HUD 4000.1 defines what type of FHA home loan you may need to apply for depending on what your needs are; there are loans for existing construction homes, and new construction. The phrase "new construction" can refer to one of three basic types of circumstances. From HUD 4000.1:

• Proposed Construction refers to a Property where no concrete or permanent material has been placed. Digging of footing is not considered permanent.
• Under Construction refers to the period from the first placement of permanent material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.
• Existing Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or equivalent. The Property must have never been occupied.

Some borrowers want a home that is built just for them. This is definitely the right use for an FHA One-Time Close loan. There are also those who don't have a priority on having a home built especially for them-a house that has never been occupied is perfectly acceptable.

FHA home loans are available for these properties, which are technically classified as "new construction" with a sub-classification (as described above) of properties "existing less than one year."

Are One-Time Close Loans Available For Mobile Homes?

FHA construction loans may also be available (depending on circumstances) for the assembly of manufactured housing (including the cost of the unit and all on-site installation expenses, according to HUD 4000.1). However, some lenders may not issue FHA home loans for manufactured homes, and that includes construction loans. You will need to discuss your purchase with a participating lender to see if that financial institution will approve such a loan.

New construction loans may have higher FICO score and credit history requirements, and the process for buying and having the home built are more complex than for purchasing existing construction properties that have at least one previous owner.

Want More Information About One-Time Close Loans?

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 by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
 
FHA.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). In addition, the following homes/building styles are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
 
Your email to [email protected] authorizes FHA.com to share your personal information with a mortgage lender licensed in your area to contact you.

1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. 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.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines.  Most lenders will go up to $750,000 and review higher loan amounts on a case by case basis.   If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.

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