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

FHA and VA Construction Loan Benefits

October 29, 2019

FHA and VA Construction Loan Benefits
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.

Construction Loans at OneTimeClose.com FHA, VA, and USDA: One-Time Close Loans

Want More Information About One-Time Close Loans?

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
FHA.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA, VA, and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
Your email to [email protected] authorizes FHA.com to share your personal information with a mortgage lender licensed in your area to contact you.
  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 and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 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 veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines.  Most lenders will go up to $750,000 and review higher loan amounts on a case by case basis.   If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.

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