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Buyers can have a brand new home built specifically to their liking, rather than settling on a resale home. There are no payment requirements during the construction period. The FHA also offers more flexible underwriting requirements with relaxed debt ratios.

FHA Loan Programs for 2022

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Buyer Benefits for FHA One-Time Close Loans

FHA Construction Loans for Building Your Dream Home

FHA One-Time-Close Loans - Buyer Benefits

Many potential borrowers aren’t aware that they have the option of building their dream home as a part of one, consolidated home loan. The FHA One-Time Close Loan offers them a number of advantages to help them do so.

Buyers Benefits

Buyers can have a brand new home built specifically to their liking, rather than settling on a resale home. Having a new home built from scratch used to mean securing a short-term construction loan and then refinancing with a conventional loan once the house was built. With the FHA’s Construction-to-Perm Loan, the borrower closes one time, reducing loan costs and ensuring that no re-qualification is needed once construction is complete. This protects against unseen qualification changes on credit and income. The loan converts to a permanent mortgage as soon as construction is complete, and the new home is built.

With the FHA One-Time Close Loan, homebuyers can also take advantage of the agency’s lenient qualifications, such as easy credit qualifying for scores, more flexible guidelines for homebuyers’ work histories, small escrow reserve requirements, and debt-to-income ratios up to 50 percent. The low, 3.5 percent down payment requirement is also available, which can be paid entirely via gift funds.

The FHA also offers more flexible underwriting requirements with relaxed debt ratios. Approved builders are able to make a contribution of up to 6 percent toward the borrowers’ closing costs & prepaid items, without having a dollar-for-dollar reduction from the loan amount. Owning the land prior to construction could mean less of a down payment. Equity in the land owned can go towards your down payment requirement, lowering the overall cost of construction considerably.

Borrowers have a less stressful payment schedule as well, since there are no payment requirements during the construction period—an interim that should not exceed 150 days. Additionally, there is no minimum bank balance reserve requirement, whereas most conventional loans require a 2- to 3-month reserve in the bank to show that buyers can handle payments in the event income is interrupted.

Interest rates are locked in before construction begins. So even if there is a fluctuation in the market during the interim period, buyers will not have to worry about higher monthly payments once construction is complete.

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.

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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 will allow per VA guidelines. While there are no maximum loan amounts, 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.

One-Time Close Construction Loans

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FHA Loan Articles and Mortgage News

FHA Single-Close Construction Loans and Rehab Loan Issues

September 16, 2022 - If you seek an FHA One-Time Close construction loan or an FHA 203(k) Rehabilitation loan, there are some questions to ask when comparing lenders. You will need to know the lender’s policy on things like how the loan converts from the construction phase to the permanent phase.

Home Loan Interest Rates: Fact and Fiction

September 9, 2022 - If you want to apply for an FHA mortgage, knowing a few facts about how home loan interest rates work can really help you during the planning stages. Here’s what you need to know about home loan interest rates--especially if you want to build a home.

What Kinds of Houses Qualify for an FHA Loan?

September 3, 2022 - What kinds of houses qualify for an FHA home loan? The answer may surprise you since many people assume the types of homes they can buy are fully finished, typical suburban home. But you can purchase other types of properties, too. Do you know your options with an FHA loan?

Construction Loan Rules for First-Time Homebuyers

August 27, 2022 - Are you a first-time homebuyer? If so, you have a wide range of options open to you. Some are surprised to learn that those options include the ability to build a home on your own lot using a One-Time Close construction loan. Yes, even a first-time borrower may qualify for these loans.

Comparing FHA Lenders

August 15, 2022 - There are important questions to ask when comparing FHA lenders. Some loans require extra research. If you need a single-close construction loan, for example, you’ll need to ask some additional questions of each lender.