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Do you want to have a house built for you from the ground up? This is an option, even for first-time home buyers. An FHA One-Time Close construction loan has a 3.5% down payment requirement, which is lower than you may be offered on a conventional loan.

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

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

FHA Construction Loan Facts

May 27, 2020

FHA Construction Loan Facts
There are many options available when you are searching for a house to buy. The first set of choices often involves the type of home loan you want to apply for--believe it or not there is no one-size-fits-all mortgage. If you want to purchase a condo with an FHA mortgage, for example, there is a specific loan and procedures for that.

But what if you want to have a house built for you from the ground up? This is also an option, even for first-time home buyers. You can apply for a conventional one-time close construction loan, but you’ll be applying for conventional loan interest rates and terms; an FHA One-Time Close construction loan has a 3.5% down payment requirement, which is lower than you may be offered on a conventional loan.

What do you need to know about construction loans?

Single-Close Construction Loans

There are two basic types of construction loan; one requires not one, but TWO applications, two separate loans, and two closing dates. The stress for the borrower here includes not knowing if the second loan credit check and application process will go differently than the approval for the first loan.

A single-close loan (also known as a One-Time Close construction loan) eliminates the two loan process, concentrating the entire transaction into one loan application and closing date. It’s a simpler process for the borrower.

FICO Score Requirements

Thers is NO higher FICO score requirement in FHA loan rules for a One-Time Close mortgage. However, lenders may require higher FICO scores than the FHA minimums. What this means is that you should shop around more for a construction loan, comparing interest rates and down payment terms, FICO score requirements and closing costs.

Don’t take the first lender willing to work with you at face value; shop around to see who else is making offers for the loan you want and what the FICO score requirements are.

Permits and Other Requirements

One aspect of One-Time Close loans involves the required permits, building code compliance, and other issues that will vary depending on state law, local building code, health regulations, etc. It is crucial to ask around about how long it may take to obtain the required permits to build your home, whether there are local issues that may cause delays in getting those permits, etc.
Some crowded housing markets may take six months or longer to approve permits, depending on the state you live in and other variables. Don’t underestimate the power of the local bureaucracy to slow down your construction plans. Start early, and plan for delays.


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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