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FHA One-Time Close construction loans are designed for those who want to have a home built for them from the ground up. Construction loan mortgages, especially FHA One-Time Close loans, are unique among mortgage lending products and have some distinct advantages.

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Is the FHA One-Time Close Construction Loan Right for You?

Is the FHA One-Time Close Construction Loan Right for You?
April 14, 2018 - FHA One-Time Close construction loans are designed for those who want to have a home built for them from the ground up. Construction loan mortgages, especially FHA One-Time Close loans, are unique among mortgage lending products and have some distinct advantages.

But this type of home loan isn’t perfect for every house hunter-knowing how construction loans work can help you make a more informed choice about the type of mortgage loan that is right for you.

FHA One-Time Close Loans Are Different Than Existing Construction Loans

Construction loans are higher risk propositions for the lender and as such, lender FICO score requirements will be higher than for new purchase loans for existing properties. Be prepared for additional scrutiny on your FICO scores and loan repayment history, plus other factors the lender may deem relevant.

Construction Loan Options Vary Depending on the Nature of the Loan

When you apply for a “standard” construction loan, you have two applications, two closing dates, and all of the credit and financial scrutiny you would expect for both applications. FHA One-Time Close construction loans eliminate the need for the second loan, combining the construction portion of the loan with the mortgage portion. Escrow is used to pay contractors and buy materials.

On paper a borrower may be allowed (under FHA guidelines) to act as her or his own contractor, but you may find lenders are not willing to approve construction loans if the borrower does not hire an outside contractor.

For One-Time Close loans, your options may be restricted in certain ways such as the size of the property you can build. Many lenders offer One-Time Close loans only for stick-built housing, limit the size to a single family property (as opposed to a two, three, or four unit building), or other requirements.

These are not FHA loan restrictions, but lender guidelines, which will vary depending on the lender. FHA loans technically permit the use of construction loans to have manufactured housing assembled on site, but your participating lender may or may not offer these loans.

FHA One Time Close Construction Loans May Require Additional Considerations That Ordinary Construction Loans Do Not

FHA construction loans in some housing markets are not approved until the borrower has a building permit in hand due to long processing times for the permits, which the lender nor the FHA have any control over.

You may find that in some housing markets it’s permitted for you to apply for the construction loan while seeking a building permit, but in many cases the approval times for such permits are much lower-four months as opposed to California’s 18 months or longer.

Learn More About FHA One-Time Close Construction Loans

We have done extensive research on FHA One-Time Close mortgages and spoke directly to the licensed lenders for most states. These are qualified mortgage loan officers who work for lenders that know the product well. 

Each company has supplied us the guidelines for their product. If you are interested in being contacted by one licensed lender in your area, please respond to the below questions to save time. All information is treated confidentially.

Your response to onetimeclose@fha.com authorizes FHA.com to share your personal information with a licensed mortgage lender in your area to contact you.

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

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 credit score and/or the Co-borrower’s credit score, if known. 620 is the minimum qualifying credit score for this product.

4. Are you or your spouse (Co-borrower) eligible veterans?

5. If either of you are eligible veteran’s, the down payment is $0 up to the maximum VA lending limit for your county. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.

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