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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September 6, 2023There are many options when you are deciding on a construction loan. Some One-Time Close government-backed mortgages might seem to have identical features compared to their conventional counterparts, but the differences can be important. How much do you know about the features of a conventional One-Time Close mortgage versus the equivalent offered by the FHA?
August 30, 2023When it’s time to build your dream home using a One-Time Close construction loan, there is a lot to learn. For example, many first-time home buyers know the house they want to purchase with an FHA mortgage must pass an FHA appraisal. Same for a VA home loan and conventional mortgages. But when a borrower wants to build a home from the ground up and needs to buy a parcel of land to do that, a different kind of appraisal is required.
August 23, 2023Using a One-Time Close construction loan to build a home from the ground up on your own lot can be a great experience. You have more say over the final disposition of your new home than you would if you purchased existing construction, and everything installed in the home will be brand new. But there are some limits to these loans you should know about before applying for the single-close construction loan.
