One-Time Close Loans vs. Owner-Builder Loans

October 25, 2022

Do you want to explore your home loan options for building a new home from the ground up? There is an FHA loan for that. Do you want a fixer-upper? There is a different type of FHA mortgage for that type of purchase. A participating FHA loan officer can help you to apply for the right loan. Different needs require different mortgages!

That means there’s a completely separate loan process for building a house on land you own or purchase to build on. This requires an FHA single-close construction loan--and these are mortgages that use a contractor for the labor.

Being Your Own Builder

Some FHA loan applicants want to know if they can act as their own builders, accomplish their own building work or bring in friends and family to help build.

The short answer is that while on paper FHA loan rules say this might be possible depending on circumstances, good luck finding a participating lender who will approve you to be your own builder for a One-Time Close project.

Borrowers who want to do their own construction may be better served by an owner-builder loan, but the FHA Single-Family Home Loan program does not include this option. You would need to seek conventional financing for such a loan which may require higher down payments and more up-front costs.

Not everyone is able to qualify for an owner-builder loan.

Why? You may find that in typical cases a lender wants to see credentials and other proof of experience with such projects. If you are new to home improvement and DIY, you may not qualify for an owner-builder loan and it may be up to the lender to approve or deny this type of loan based on your qualifications. Even if you have some experience, it may not be enough for your lender. A fully qualified builder is required.

FHA One-Time Close Loans and Being Your Own Builder

Some borrowers want to know why they cannot act as their own contractor or labor for an FHA single-close mortgage. Much has to do with the fact that FHA construction loans require a strict schedule for completion.

Lenders know that borrowers doing their own construction work may not be able to adhere to those timelines. It is simply not in the lender’s interest to take the risk and let the borrower also act as the builder.

One-Time Close construction loans require those who are approved to do the work to carry all required permits, maintain insurance, and commit to a fixed schedule for completion in all phases of the project.

It is true that there can be unexpected delays or setbacks in any construction project, but there must be an overall schedule of and plan for completion within the accepted time frame.


 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) 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.