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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June 26, 2025The decision on getting a One-Time Close loan should be based on personal priorities. If your primary goal is to create a fully customized home, and you possess the patience and diligence required for a long-term project, building with a construction loan is an excellent path.
June 12, 2025Are you considering building from the ground up using a One-Time Close mortgage? Knowing which costs to anticipate and how much to expect to pay at closing time are key factors in a successful single-close residential real estate construction loan. What does a first-time borrower need to know about these costs when still planning and saving for the OTC loan?
May 27, 2025Why do some home buyers build, and why do some buy existing construction? For starters, building a dream home from the ground up on your own lot isn’t for everyone. An FHA One-Time Close loan is a specialized mortgage designed to finance the construction of a new home. It consolidates all associated costs, including the land purchase, construction expenses, and the permanent mortgage, into a single loan transaction.
