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For some borrowers, the advantages of FHA and VA construction loans include being able to design a home to a specific need or plan, especially if the house hunter needs to install features not considered common among the available home sales in the area.

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November 20, 2019
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FHA.com is a privately owned website, is not a government agency, and does not make loans.

FHA Loan Articles

News and Updates for Homeowners

FHA and VA Construction Loan Benefits

FHA and VA Construction Loan Benefits
October 29, 2019 - What are the advantages to choosing an FHA One-Time Close (OTC) construction loan over a loan to buy an existing home?

For some borrowers, the advantages include being able to design a home to a specific need or plan, especially if the house hunter has need for special areas such as a screening room, or needs to install features not considered common among the available home sales in the area.

Borrowers who want to build a home on their own land with a low down payment requirement should look no further than an FHA OTC loan; the minimum down payment is only 3.5% and there are no penalties for paying more than the monthly mortgage payment or for paying off the mortgage early.

And for qualified borrowers who want to build a house on their own lot from the ground up and make ZERO down payments? A VA One-Time Close construction loan would be the option to explore.
 
VA construction loans are sometimes hard to come by because borrowers don’t know the right loan to ask for, or the lender does not offer these loans. In such cases, it’s best to talk to someone who knows which lenders might be agreeable to a construction loan, especially one with low interest rates and no down payment.

FHA construction loans, with their 3.5% down payment and low interest rates, often permit the borrower to build a single-unit property using a licensed contractor. FHA loan rules technically permit the borrower to act as her own contractor under the right circumstances but you will find that in general lenders may not permit this.

FHA loans have no income restriction, need-based requirements, and they do not require that the person having the home built to suit be a first-time home buyer.

VA One-Time Close mortgages DO have a military service requirement and such loans are not open to the general public. But for those who do have qualifying military service, the VA Construction Loan option is a very good one to consider. 0% down on a home you have built to your specifications? It’s a very tempting possibility.

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 [email protected] 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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