FHA One-Time Close Loans: Program Changes in 2021

December 15, 2020

The FHA and HUD have announced changes to the FHA One-Time Close program in 2021--changes which formalize certain elements of the program modified by Final Rules and other procedures. The FHA and HUD released a Mortgagee Letter on the HUD official site in October 2020 announcing alterations to its maximum financing policy as well as alterations in the following areas:
 

• Early Start Letter and Pre-Approval requirements have ended.
• Consolidation of requirements regardless of loan-to-value ratio.
• Form HUD-92544 Warranty of Completion is now a requirement for all New Construction.
• Providing alternative inspections by a third party, who is a registered architect or structural engineer, in the absence of International Code Council certified Residential Combination Inspector or Combination Inspector.
• Updating when Form HUD-NPMA-99-B, New Construction Subterranean Termite Service Record is required to align it with the four acceptable termite treatment applications reflected on the form HUD-NPMA-99-A.

Changes Are Optional Until January 4, 2021

When these were codified in October 2020, the Department of Housing and Urban Development states that lenders could use the new guidelines for existing mortgages with FHA case numbers, however, that was listed as optional until January 4, 2021. After that date, the new rules MUST be used for all FHA One-Time Close construction mortgages.

The HUD official site notes there were a round of regulatory and policy changes in 2018 and 2019, intended streamline inspection and warranty requirements for FHA-insured mortgages. There was also a need identified to update maximum financing policies for FHA New Construction loans.

FHA Inspector Roster requirements were ended thanks to an FHA Final Rule published on July 3, 2018; Insured Ten-Year Protection Plan requirements, (which the FHA and HUD state were "previously codified") got eliminated by the Final Rule published on December 14, 2018.

No FHA-Mandate For Maximum Loan Amounts Without Pre-Approval

The HUD official site notes that as "part of the December 14, 2018 Final Rule, 24 CFR 203.18(a)(3) was eliminated" resulting in an end to the FHA-mandated limit to maximum financing of New Construction without Pre-approval. Lenders can now also issue "an Early Start Letter in jurisdictions that do not require building permits if a case number has been assigned."

Remember, these changes were optional for lenders at publication time (the FHA and HUD issued the Mortgagee Letter in October 2020) but they are mandatory for all applicable FHA loan case numbers assigned on or after January 4, 2021.

 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.