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

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 [email protected].

One-Time Close Construction Loans

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FHA Loan Articles and Mortgage News

VA One-Time Close Construction Loans: When Mortgage Payment Start

September 6, 2020 - The VA loan benefit includes the ability to build a home on your own land using a VA One-Time Close construction loan. VA One-Time Close loans allow you to build a house on your own land or purchase land in conjunction with building a home.

Home Loans and Credit Repair 101

September 3, 2020 - It’s important to know WHY you need to address your credit long before applying for a major line of credit like a construction loan to build on your own land, or the purchase of a condo or suburban home. Your lender must review your credit patterns over the long-term to judge your creditworthiness.

FHA Home Loan Options for First-Time Buyers

August 27, 2020 - First-time home buyers have a wide range of options with FHA home loans, and those options come with lower down payment requirements and often feature more flexible FICO score requirements than conventional mortgages.

Advantages of the Construction Loan

August 26, 2020 - There is a home loan for borrowers who would rather build their home on their own lot instead of purchasing an existing construction house. This is called a One-Time Close (OTC) construction loan and features a single loan application.

Preparing for an FHA One-Time Close Loan

July 14, 2020 - The FHA One-Time Close construction loan, like its VA construction loan counterpart, is a loan backed by the government that allows the borrower to apply for a single mortgage loan to cover both the costs of construction of a home from the ground up and the purchase of the home.