The "FHA" One-Time-Close Loan
Single Close Loans allow you to wrap up the financing of lot purchase, construction and permanent mortgage into one loan insured by the FHA. Under this option, you can apply for a 15- or 30-year loan with a fixed rate that’s locked in before construction on your new home begins.
With a Single Close Loan comes a single set of closing costs. These costs can be partially paid for you, since the FHA allows interested party contributions (sometimes referred to as seller concessions, although commonly paid by the builder in the case of a construction-to-permanent loan) up to 6 percent of the total acquisition cost.
What is an FHA Loan?
The Federal Housing Administration (FHA) is a government agency within the U.S. Department of Housing and Urban Development (HUD). In an effort to stimulate America’s housing market and assist Americans in securing safe and affordable housing, the FHA insures mortgages on single and multifamily homes.
The FHA offers homebuyers a number of mortgage options, including the One-Time Close Construction-to-Permanent loan. The loan is provided by private, FHA-approved lenders and is backed by the FHA, giving lenders peace of mind about approving borrowers for large mortgages.
Who Can Apply
While only veterans and rural residents can apply for loans with the VA, securing a Single Close Loan with the FHA is easier for other homebuyers. It also allows you to take advantage of the FHA’s lenient borrower guidelines.
There is a low down payment requirement of 3.5 percent. If you already own the land on which your new home is being built and have equity in the land, the equity can be used towards the 3.5% down payment. Furthermore, the down payment can be paid for entirely with "gift funds."
Most lenders typically have a credit score requirement of at least 620. The FHA also requires proof of employment and income, and no late or missed payments in the last 12 months.
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November 10, 2022Is it smarter to build a home or buy one? In late 2022 some borrowers are asking that question, faced with rising interest rates, a lack of inventory, and high prices. What are the pros and cons of building your own home on your own lot with a One-Time Close mortgage?
November 8, 2022If you are planning to build a house with a single-close construction loan, there are a few questions you should ask before you commit to working with a construction lender. You want to know a few things about that financial institution before moving forward.
November 4, 2022The federal government is considering ways to reduce bias in the home-buying process. And one area in particular being scrutinized? Appraisals. The appraisal is a process where the home is reviewed to ensure it meets minimum standards and meets state/local building codes. It’s also the way the lender establishes the fair market value of the property. For a One-Time Close construction loan, the appraisal process works a bit differently than for existing construction property.
