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Why do borrowers who want to build a house on their own lot turn to an FHA One-Time Close construction loan instead of conventional construction loans? Perhaps for reasons that include a lower mortgage loan interest rate and a lower down payment requirement.

FHA Mortgage Loan Rates

November 20, 2019
FHA Rates for 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 One-Time Close Mortgage Interest Rates

FHA One-Time Close Mortgage Interest Rates
November 5, 2019 - Why do borrowers who want to build a house on their own lot turn to an FHA One-Time Close construction loan instead of conventional construction loans? Obviously not all do, but those who chose an FHA construction loan may be doing so for reasons that include a lower mortgage loan interest rate and a lower down payment requirement.

And those lower numbers work for construction loans, even for first-time home buyers.

One-Time Close loans do not feature FHA-required higher interest rates; at the time of this writing the mortgage loan rates for FHA loans is in a range between 3.375% and 3.5% for the most well-qualified borrowers. Those rates are subject to change on a  daily basis but in general FHA loan interest rates are lower than conventional mortgages.

Lender standards will vary depending on the bank, which is why you always read advice in finance blogs about shopping around for the best lender.

You will find some lenders more willing to work with you and your FICO scores than others. Compare lenders and their terms side-by-side to make the most informed decision you can.

What FHA Loan Rules Say About Setting Interest Rates for FHA One-Time Close Mortgages

HUD 4000.1, the FHA Single-Family Lender’s Handbook, instructs your participating FHA lender on how to process construction loans.

When it comes to interest rates, HUD 4000.1 explains that the interest rate you get on an FHA construction loan may vary depending on the phase of the project you are currently in:
“During the construction period, the interest rate may be variable. The Mortgagee and the Borrower must enter into an agreement that:
 
  • Documents the range in which the interest rate may float during construction.
  • Documents the point of interest rate lock-in.
  • Specifies that the permanent Mortgage will not exceed a specific maximum interest rate.
  • Permits the Borrower to lock in at a lower rate, if available and they have not already locked in a rate.
HUD 4000.1 adds that the lender is required to qualify you for the loan, “at the maximum rate at which the permanent Mortgage may be set.”

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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