One-Time Close Construction Loans: No Loan Limits?

January 21, 2020

Is there really a construction loan that lets you build a house on your own lot with no loan limit? AND a zero-down loan at that?

Believe it or not, such a loan DOES exist. It’s the VA Construction Loan, which can be offered as a One-Time Close mortgage featuring only one application and closing date for the mortgage. But what is the catch?

It’s true that the VA One-Time Close construction loan permits a no down payment mortgage with no VA-imposed loan guaranty limit. But these loans are only open to qualifying military members or veterans, certain surviving spouses of military members or veterans, military retirees, etc.

VA mortgages are one of the perks of military service and a zero down construction loan can be a huge advantage.

The Department of Veterans Affairs changed the VA loan program starting in 2020 by, among other things, removing VA-imposed loan guaranty limits. It is now possible to buy a home using a VA loan and negotiate the loan amount with the lender without the previous by-county limit.

That does not mean you have limitless borrowing power since the lender must determine you can realistically afford the loan, But it does mean more flexibility in your house hunting options.
Naturally, some borrowers intrigued by a zero-downpayment home loan with no mortgage loan limit are disappointed to learn that only qualifying members of the military community have access to these construction loans.

But there ARE other options. The FHA One-Time Close construction loan does not feature a zero-down option, but the down payment requirement for FHA construction loans is a low 3.5% of the asking price for borrowers who qualify.

And on top of that, you may be able to get down payment assistance from a local program near you.

FHA construction loans are open to any financially qualified borrower. You do not have to have a financial need, you don’t need to be a low-income borrower, and there are no income caps on FHA mortgages. Some people confuse USDA loans with FHA mortgages--USDA loans ARE need-based, but FHA loans are NOT.

Talk to a lender about your construction loan options today--you might be surprised to learn about the options open to you to buy or build.


 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.