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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August 21, 2024One-time close construction loans can help make the dream of a custom-built home a reality. However, construction loans are more complex than existing construction mortgages, and borrowers need all the resources they can find online when learning about their options for this type of mortgage.
August 9, 2024Choosing the right mortgage is essential to build a new home. Some borrowers confuse residential construction loans with non-residential equivalents and waste time in their loans' planning and saving stages, looking at options that don’t suit their needs. One-Time Close construction loans are approved for residential properties. You can get these as a VA or FHA construction loan, and the usual occupancy requirements associated with VA loans and FHA mortgages apply to construction, too.
August 2, 2024Are you exploring your home ownership options and thinking about the construction of a brand-new home? Consider the basic loan options available: single-close construction loans and two-close construction loans. You may already know what loan type is right for you, but making an informed decision is key.
