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Some new to the real estate market might assume they are not qualified to be approved for a construction loan, but these loans have the same kinds of terms and conditions that other mortgages do and you don’t need to have special credit scores to qualify.

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One-Time Close Loan Tips

February 18, 2020

One-Time Close Loan Tips
One-Time Close (OTC) loans allow even a first-time home buyer to build a house on their own lot instead of having to choose from existing properties.

Some new to the real estate market might assume they are not qualified to be approved for a construction loan, but these loans have the same kinds of terms and conditions that other mortgages do and you don’t need to have “special” credit scores to qualify.

What does that mean? Simply that the typical credit score ranges used to qualify people for home loans is the basic standard for One-Time Close construction loans, too. Your lender might require slightly higher FICO scores depending on the size and scope of your construction project, but in general there are no unusual requirements to qualify for this loan.

Different Types of OTC Loans

There are VA, FHA, and even USDA One-Time Close loans, and whichever type you choose, you have the advantage of a government-backed mortgage with a lower down payment requirement (3.5% minimum) than non-government-backed mortgages.

Start Early

Because construction loans require permits and other documents that existing construction loans do not, you’ll need to put in some extra time to apply for permits when the time comes, to research plans and home designs, etc. Give yourself enough time to get it all done.

Save More

Your OTC loan proceeds will pay for the construction phase of the project, but you may encounter unexpected expenses along the way such as any required follow-up inspections, flood zone determination, and other costs. These are the same kinds of general expenses borrowers should anticipate when buying an existing construction home, too. Save a bit of extra cash to soften the economic impact of these costs when they arise.

Ask Questions

There are some not-so-obvious questions to ask about OTC loans. For example, what is the typical processing time for permit applications in that housing market? Is extra time needed to get these permits? In some housing markets, getting a permit can take many months longer than in other areas.

You should also ask what are typical completion times for these projects, how long you should expect to remain in your current home or rental unit, and if there are local permitting or environmental issues that could affect the completion of the project.

You should also ask the lender to show you a side-by-side breakdown of the OTC loan compared to an existing construction mortgage. This can be helpful if you don’t fully understand how the construction loan process works and need to see how quickly (or not) you can get into a new home.

It doesn’t pay to be in a hurry with a construction loan, so if you need a new home faster than the time it realistically should take to build a home, it may be better to look at a loan such as the FHA 203(b) home loan, an FHA Rehab loan for fixer-uppers, or even an FHA condo loan.


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


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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