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There is a big difference between FHA One-Time Close (OTC) construction loan program and the VA One-Time Close version. FHA OTC loans require a down payment, while VA mortgage loans allow qualified borrowers the option of a zero-money down construction loan.

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Down Payment Rules for VA One-Time Close Loans

Down Payment Rules for VA One-Time Close Loans
May 19, 2018 - There is a big difference between FHA One-Time Close (OTC) construction loan program and the VA One-Time Close version; FHA OTC loans require a down payment, while VA mortgage loans of all kinds (including OTC) allow qualified borrowers the option of a zero-money down construction loan.

The ability to get a no-money-down VA construction loan is a big advantage; naturally if you are reading this you will want to know whether you qualify for a VA One-Time Close loan to build a home from scratch for with no down payment.

VA home loans, whether they are construction-to-permanent loans like OTC or for the purchase of existing construction homes, are only offered to military members and qualifying surviving spouses of military members who served a minimum amount of time on duty.

As a benefit offered in exchange for military service, VA home loans are not available to borrowers outside those qualifications the way FHA mortgages are. FHA loans are open to any financially qualified applicant.

Borrowers who qualify for a VA loan may also qualify to choose the FHA OTC option instead. However, those who qualify for an FHA mortgage are not necessarily eligible for the VA loan program.

VA down payment rules for One-Time Close construction loans (as well as other types of VA mortgages) allow the borrower to make a down payment if she so chooses.

Doing so can bring another angle of VA One-Time Close loans have that their FHA counterparts do not feature-the ability to lower the VA loan funding fee by making the right size down payment.

The VA loan funding fee is required for most VA loan transactions. Exceptions are made for those who receive, or who are eligible to receive VA disability benefits based on VA-rated, service-connected medical issues.

This means that veterans who qualify for VA disability pay can get the dual benefit of a VA One-Time Close construction loan featuring no down payment AND no VA loan funding fee.

If you are not sure whether you qualify for this, work with a loan officer or contact the VA directly to access a copy of your VA Loan eligibility paperwork to see if your status is currently listed and what your VA loan funding fee obligation is at the time of that request.

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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