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The Department of Veterans Affairs, The USDA, and the Federal Housing Administration all offer a version of this with aspects that may be unique to each one; for example, VA One-Time Close construction loans feature no VA-required down payment (like other VA home loans) for qualified borrowers.

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One-Time Close Loans: USDA, VA, and FHA

May 8, 2018 - The One-Time Close (OTC) construction loan is one offered by a variety of government-backed home loan guaranty programs. If you are interested in having a home built for you from the ground up, rather than applying for a mortgage loan to purchase an existing property, the One-Time Close construction loan may be right for you.

The Department of Veterans Affairs, The USDA, and the Federal Housing Administration all offer a version of this with aspects that may be unique to each one; for example, VA One-Time Close construction loans feature no VA-required down payment (like other VA home loans) for qualified borrowers.

USDA One-Time Close construction loans may allow borrowers to finance certain closing costs that aren’t allowed with other types of loans, and FHA One-Time Close construction loans may permit third parties to pay some of the borrower’s closing costs (but these contributions are not considered part of the required down payment.

The One-Time Close loan is advantageous, regardless of whether it’s VA, USDA, or FHA, because it combines two loan applications into a single procedure, approval, and closing date.

With OTC, borrowers do not have to worry that the loan for the construction phase will be approved but the second loan (used in non-One-Time Close construction loans) might experience trouble down the line. There is a single closing date that protects the borrower from potential loan denial for the second loan (the mortgage itself) that would occur if the borrower was not approved for One-Time Close.

What do all three of these versions of the One-Time Close Construction Loan have in common?
  • Lender standards will apply above and beyond One-Time Close loan minimum requirements from the VA, FHA, or USDA. Lender requirements may factor into your credit score minimum requirements, loan repayment history, interest rates, etc.
  • There are restrictions on the type of property you may build with a One-Time Close construction loan guaranteed by FHA, VA, or USDA. Additional lender restrictions may apply. Some lenders do not allow manufactured, mobile home, or modular home projects.
  • FICO score requirements may, depending on the lender, be higher for construction loans in general.
  • Those who are approved for One-Time Close construction loans are approved to construct owner-occupied residences only.
  • One-Time Close loans cannot result in excess cash back to the borrower aside from legitimate refunds.
  • Escrow is required to pay contractors, purchase materials, etc. Lender requirements for escrow, state law, and federal regulations will determine how your escrow account is set up and handled. Depending on the phase of your loan, remaining unused funds in escrow may ultimately result in a reduction in loan principal rather than as cash back to the borrower in some form. Borrower should not expect cash back from escrow (as mentioned above).
  • There may be restrictions, depending on the lender, for how many living units your property may have.
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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