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

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?

One-Time Close Loans are available for FHA, VA, and USDA Mortgages. These loans also go by the following names: 1 X Close, single-close loan, or OTC loan. This type of loan allows you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) 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, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) - and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT function as your own general contractor (Builder) / not available in all states.

In addition, the following homes/building styles are NOT allowed under these programs: Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.

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 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.

One-Time Close Construction Loans

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FHA Loan Articles and Mortgage News

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

May 8, 2022 - Some people aren’t sure which home loan product is right for them. In some cases it’s a question of supply and demand; if you seek an FHA manufactured home loan in New York City you are likely to be disappointed. But what about less obvious issues?

FHA Loan Tips for First-Time Homebuyers

April 21, 2022 - If you are looking for a home loan that has no early payoff penalty and more flexible credit requirements, it’s smart to consider an FHA mortgage. These mortgages help you purchase a new home, a fixer-upper, or have a house built from the ground up on your own lot.

FHA One-Time Close Construction Loan Limits: Higher in 2022

April 18, 2022 - Do you want to build a home from the ground up? You can do this with low down payment requirements with an FHA One-Time Close Construction Loan. And construction loan borrowing power has increased in 2022 because FHA loan limits have increased from the previous year.

FHA Home Loan Types

April 3, 2022 - When it comes to your FHA home loan options, there are many different property types you can buy with an FHA home loan. And even though you can choose from a diverse range of options for many of them there is one type of Single-Family Mortgage loan that is used to buy the property.

Pay Attention to Your Debt-To-Income Ratio

February 12, 2022 - Your FHA loan options in 2020 include new purchase loans, reverse mortgages, cash-out FHA refinance loans, and the One-Time Close construction loan if you want a house built for you. But planning ahead is key and you will need to examine and work on the amount of debt you carry