Applying for a 2020 One-Time Close Construction Loan

January 9, 2020

FHA One-Time Close construction loans are intended to help those who want to own and occupy a home to build from the ground up on their own land. There is also a VA loan equivalent to the FHA construction loan that, starting in 2020, features no down payment in most cases AND the ability to build a home from the ground up with no VA loan guaranty limit.

When you apply for a construction loan or any other type of home loan, you will have certain paperwork and documentation that must be submitted to the lender as part of the application process.

The participating lender will need a range of financial information including your bank account numbers, tax information, and even a list of residences and employers from the last two years. This information is used to determine the borrower's credit, income, and employment with the most up-to-date information available.

Tax Info Needed

Most mortgage loan applicants (for construction loans or otherwise) are required to furnish copies of their W2s from the last two years.

W2s document the borrower's net and gross income plus applicable taxes and withholding, and serves as a record of actual wages earned (which verifies what the borrower listed as income on the FHA mortgage loan application).

HUD 4000.1 requires the lender to “...obtain complete individual federal income tax returns for the most recent two years, including all schedules.” HUD 4000.1 also weighs in on self-employed borrowers--these applicants have additional requirements including two years of tax returns.

Proper Sourcing Required

Borrowers must respect the FHA loan requirements for the chain of custody for such information. The buyer is not allowed to hand in copies of the tax filer’s copies of tax returns--the tax returns must be sent directly from the IRS, just like credit reports must come directly from the credit reporting agencies.

Borrowers may be required to sign a release authorizing the underwriter or loan officer to request IRS forms on your behalf.

If you are applying for a construction loan and are NOT self-employed, you may be able to furnish the W2s with no additional paperwork needed except for that which may be required by the FHA or banking regulations, but release forms may still be required so the lender can obtain credit reports and related information.


 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.
 
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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.