Depending on which type of One-Time Close loan you apply for (FHA, VA, USDA) you may find rules dictating whether a borrower can act as his or her own contractor for construction work. For the VA OTC programs, there are rules that specifically prevent this.

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One-Time Close Construction Loan Advice from the VA

August 21, 2018

 One-Time Close Construction Loan Advice from the VA
Borrowers looking for a One-Time Close (OTC) Construction loan / Single-Close Construction loan have several options. There is an FHA One Time Close construction loan available to all financially qualified borrowers, there is a USDA construction loan that features one application and closing date for qualified borrowers living in rural areas with populations that meet federal guidelines-35,000 citizens or less at the time of this writing.

And then there is the VA One-Time Close Construction Loan, which is available to financially qualified borrowers who have served a minimum time on military duty.

This VA loan is also open to certain qualified surviving spouses of military members who have died as a result of military service, are listed as missing in action (MIA) or prisoners of war (POW).

The Department of Veterans Affairs official site has some advice for veterans and those currently serving who are interested in their home loan options with a VA One-Time Close construction loan.

Depending on which type of One Time Close loan you apply for (FHA, VA, USDA) you may find rules for these programs that do or do not permit the borrower to act as his or her own contractor for construction work; in the case of VA OTC loans, there are rules that specifically prevent this.

It’s good to know that when the program you choose does permit the borrower to act as a contractor, lender standards may also apply-the lender may not approve such a transaction in spite of it being technically permitted where applicable.

The VA official site states that the borrower will be required to submit plans and specification for the construction project as part of the application process. This will need to be done in conjunction with the builder.

One very good piece of advice from the Department of Veterans Affairs about VA One-Time Close construction loans involved your early choices for design specs. “Make sure you are building a home that is common in size and design for the area.”

Furthermore, “The home must be appraised per the plans and specs given to the appraiser. If a borrower over builds for the area, or builds an uncommon home, the appraisal may come in lower than needed for a zero down payment.”

The down payment issue is an important one because hypothetically, any financially qualified VA borrower can technically apply for a loan with zero money down. But if the appraised value of the property is lower than the price, the borrower will be asked to make up the difference in cash, rather than financing the difference into the loan.

Learn More About FHA, VA and USDA One-Time Close Construction Loans / Single-Close Construction Loans

We have done extensive research on One-Time Close / Single-Close construction loans 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 [email protected] authorizes us to share your personal information with a licensed mortgage lender in your area to contact you.

Please note that the One-Time Close / Single-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?  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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Understanding the Purpose of Your Mortgage Down Payment
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