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The FHA One-Time Close Loan helps contractors with a smooth, start-to-finish process that allows consumers to purchase and build a home with a single mortgage. Builders can make contributions of up to 6% toward closing costs and prepaid items.

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May 24, 2018
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Builder Benefits for FHA One-Time Close Loans

FHA Construction Loans for Building Homes

FHA One-Time-Close Loans - Builder Benefits

The FHA Construction-to-Permanent program is an avenue that many builders should explore when looking for additional business. By partnering with pre-approved homebuyers, contractors can take advantage of a smooth, start-to-finish process that allows consumers to purchase and build a home according to their liking, all in a single mortgage.

Builder Benefits

When building a home, most conventional mortgages require the borrower to qualify twice—once for the construction loan and again for the purchase. The FHA One-Time Close Loan, on the other hand, skips the tedious requalification process, which involves a second credit check and presentation of documents. Not only is this a cost and time saving step, but it also protects builders involved in the loan against unforeseen circumstances, such as buyers losing their jobs or taking a hit to their credit scores.

Sellers and builders can make contributions of up to 6 percent toward the homebuyer’s closing costs and prepaid items. Any contribution funds beyond that are reduced, dollar-for-dollar, from the loan amount. The high, 6-percent threshold allows buyers to receive the same financing without having to forfeit contributions.

Borrowers can take advantage of FHA’s lenient underwriting criteria, such as lower debt-to-income ratios compared to other conventional loan types. These perks make the FHA One-Time Close Loan appealing to many potential homebuyers, making it an opportunity for builders to gain contracts.

When financing with a Construction-to-Permanent loan, funds are drawn in phases, up to 5 times. A draw schedule is created by the lender, which the buyer and builder agree to. This ensures that all contractors are paid on time, as the project progresses.

Among the many advantages that come with an FHA loan, builders and buyers understand that the low down payment requirement is 3.5 percent. Additionally, the entire amount can be covered in gift funds which attracts more consumers.

There is a growing number of individuals that have an immediate need for small- to mid-size homes built from scratch. FHA.com works with licensed FHA lenders who specialize in the One-Time Close Loan process to pre-approve potential homebuyers looking for builders to do the job. Builders have an opportunity to be first in line to be paired up with these individuals and take on projects that would otherwise fly under the radar.

For Builders interested in receiving the FHA One-Time Close Builder registration approval form, please send your request to otcbuilder@fha.com.

One-Time Close Construction Loans

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FHA Loan Articles and Mortgage News

FHA Rehab Loans: What Are Improvement Standards?

May 11, 2018 - For those who want to rehab an existing home rather than having one built from scratch, the FHA 203(k) rehab loan is an important option. This FHA mortgage, which is also available as a refinance loan, allows the borrower to make renovations and improvements to the property.

FHA Loans and Mortgage Insurance Requirements

May 6, 2018 - Conventional mortgages require private mortgage insurance (PMI) unless the borrower makes a  lender-prescribed down payment that eliminates the need.  FHA mortgage loans are different.  They don’t require PMI, but they do require an Up Front Mortgage Insurance Premium and a mortgage insurance premium (MIP) instead.

FHA Construction Loan Rules and Lender Requirements

April 28, 2018 - When you examine your FHA construction loan options, choosing between a One-Time Close construction loan and other construction loan options with two loans and two closing dates are only part of your decision-making process.

Is a Builder's Permit Needed for a One-Time Close Construction Loan?

April 22, 2018 - One of the main issues with construction loans with two closing dates is that there is no guarantee that the borrower will qualify for the second loan. Borrowers who do not use FHA One-Time Close loans must be careful with credit and related financial issues.

FHA, VA, and USDA Construction Loan Options

April 16, 2018 - FHA One-Time Close construction loan options are available for borrowers who wish to apply for an FHA mortgage, but don’t want to buy an existing property. Not all borrowers understand they have options for this type of loan-options that include VA and even USDA construction loans for qualified applicants.

FHA.com Reviews

FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!