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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May 21, 2025A One-Time Close (OTC) residential construction loan is a specialized financing product that combines the financing for a new home's construction phase and the permanent mortgage into a single loan with just one closing. Unlike other methods that require separate loans for building and then for long-term ownership, the OTC loan streamlines the entire process, offering a simplified and often more cost-effective approach to building a custom home than two-close construction loans.
April 29, 2025If you know about regular FHA loans for buying existing homes, the FHA OTC loan for building shares many similarities, but with some key construction-specific twists. FHA One-Time Close mortgages are backed by the Federal Housing Administration. This government insurance protects lenders if a borrower can't pay, allowing lenders to offer loans with easier qualification rules. This makes it a good option for first-time buyers or those who might find conventional loans harder to get.
April 16, 2025There are two popular ways to finance new home construction using a single loan: the FHA One-Time Close (OTC) loan and a similar Conventional single-close loan. What’s a single-close mortgage? Think of it as an "all-in-one" loan for building a house. Instead of getting one loan for the construction phase and then another separate mortgage loan once the home is finished, a single-close loan combines everything into one package. It covers land, materials, labor, permits, and builder fees.
