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Building a house takes time, and those who feel a sense of urgency about moving into a new home should purchase existing construction instead. But if you have time to wait for the process to unfold, a One-Time Close construction loan may be a smart choice.

FHA Loan Programs for 2022

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

Who Is Right for an FHA One-Time Close Construction Loan?

August 12, 2022

Who Is Right for an FHA One-Time Close Construction Loan?
If you want to apply for an FHA One-Time Close construction loan, how do you know if you are the right type of borrower? Believe it or not, there IS such a thing where construction loans are concerned. They aren’t for everyone, and these loans can be more complicated than your  typical mortgage loan.

Building a house takes time, and those who feel a sense of urgency about moving into a new home should purchase existing construction instead. But if you have time to wait for the process to unfold, a One-Time Close construction loan may be a smart choice.

There are two basic types of construction loan. One type is offered by the FHA Single-Family Home Loan program and has only one application and closing day.

The other type of construction loan is known as a two-close loan. These have separate loans for the construction phase and one for the mortgage. The second loan is called the “permanent” loan.

Two Applications

You are required to credit qualify for both loans, and you will have two closing dates. There is a danger that you could be approved for the construction loan but denied for the permanent loan (the mortgage) if your financial position changes in the meantime. That could mean loss of a job, loss or reduction in income, missing payments on your financial obligations, etc.

A two-close construction loan is likely best for borrowers who have Excellent credit, this helps to sidestep the concern about not being approved for the second loan. What is “Excellent” credit? In this case it’s a proper noun describing FICO scores at 800 or better, according to the credit bureau Equifax.

Who Is Right for an FHA One-Time Close Construction Loan?

A One-Time Close loan, featuring a single application and closing day, is offered to those with Good credit or better. “Good”, as described by Equifax, applies to FICO scores between 670 to 739. FHA lenders typically may approve these loans for applicants with FICO scores in the mid-600 range.

Consider an FHA One-Time Close mortgage if your repayment history includes no late or missed payments for 12 months or more before you apply. You will need to make a minimum down payment the same as for any other FHA mortgage. There are cases where personal circumstances dictate that it may be smart to wait a bit before you apply.

Recent Job History Counts

For example, If you have changed job types in the last year you should ask a participating lender how soon you may reasonably apply. Have you changed from salary to contract, salary to self-employed, or similar moves? You may not have enough time in your new employment type to qualify.

Consider waiting until after spending at least 24 months in your new type of work, such as being a small business owner after working for someone else. If you have multiple missed payments in your recent credit history, it may be smart to wait until you have at least 12 months of on-time payments back on your credit record.


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

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Want More Information About One-Time Close Loans?

We have done extensive research on the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) 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 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 and VA 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, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.

Contact Us: Send Us Your Request – Spam Safe

Please send your email request to [email protected] which authorizes FHA.com to share your personal information with one 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 $1,000,000 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.

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