Building Your Home On Your Own Lot: Questions To Ask
March 14, 2023
Are you ready for a construction loan? There are some simple questions to ask if you are not sure. Building your own home on your own lot or on land you buy for the project is an important investment, and you want to ensure you have covered all the following topics before committing to a One-Time Close lender.
When Was My Last Missed Payment?
Construction loans are harder to qualify for than purchase loans. The rule of thumb about having 12 months of on-time, every-time payments on all financial obligations leading up to the loan application? That will be a critical consideration with a single-close construction loan.
What Are My FICO Scores?
Typically, you should expect the lender to require a minimum of 620, but some sources report higher FICO score requirements. Your lender could be looking for scores in the 680-or-better range.
What Is My Debt-To-Income Ratio (DTI)?
If you don’t know how to calculate your DTI, you may not be ready for a construction loan. According to multiple sources, your debt-to-income ratio should be 45% or lower. Your outgoing debts should not exceed 45% of your monthly income.
Some lenders may have some flexibility around this percentage but may require compensating factors.
How Much Do I Have Saved For My Down Payment?
A construction-to-permanent loan may require 20% down. That sounds like a downside for some borrowers, but with 20% down, you avoid private mortgage insurance. You also start out with 20% equity in your home once you move in.
What’s My Contingency Budget?
Here’s something those buying existing construction do not have to deal with. A contingency budget is how much money you and the lender agree to set aside if the construction project runs over budget, experiences problems, etc. If you do not have a contingency budget now, you’ll want one before you commit.
How Long Will It Take To Get Permits?
You may be at a disadvantage if you aren’t aware of the typical time it takes to get permits and other documentation. You want to know whether there will be delays in your project while waiting for permits or other documents to be approved.
Don’t commit to building a home from the ground up without knowing how long this crucial part of the process may take. Some housing markets take much longer than others to process applications and issue your paperwork.
Want More Information About One-Time Close Loans?
We have extensively researched the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs.
We have spoken directly to licensed lenders that originate these residential loan types in most states, and each company has supplied us with the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service.
If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher-quality service.
We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allow for single-family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes).
In addition, the following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
Contact Us: Send Us Your Request – Spam Safe
Please send your email request to [email protected], which authorizes OneTimeClose.com to share your personal information with one mortgage lender licensed in your area to contact you.
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639), or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you is an eligible veteran, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines.
Most VA lenders will go up to $1,500,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
When Was My Last Missed Payment?
Construction loans are harder to qualify for than purchase loans. The rule of thumb about having 12 months of on-time, every-time payments on all financial obligations leading up to the loan application? That will be a critical consideration with a single-close construction loan.
What Are My FICO Scores?
Typically, you should expect the lender to require a minimum of 620, but some sources report higher FICO score requirements. Your lender could be looking for scores in the 680-or-better range.
What Is My Debt-To-Income Ratio (DTI)?
If you don’t know how to calculate your DTI, you may not be ready for a construction loan. According to multiple sources, your debt-to-income ratio should be 45% or lower. Your outgoing debts should not exceed 45% of your monthly income.
Some lenders may have some flexibility around this percentage but may require compensating factors.
How Much Do I Have Saved For My Down Payment?
A construction-to-permanent loan may require 20% down. That sounds like a downside for some borrowers, but with 20% down, you avoid private mortgage insurance. You also start out with 20% equity in your home once you move in.
What’s My Contingency Budget?
Here’s something those buying existing construction do not have to deal with. A contingency budget is how much money you and the lender agree to set aside if the construction project runs over budget, experiences problems, etc. If you do not have a contingency budget now, you’ll want one before you commit.
How Long Will It Take To Get Permits?
You may be at a disadvantage if you aren’t aware of the typical time it takes to get permits and other documentation. You want to know whether there will be delays in your project while waiting for permits or other documents to be approved.
Don’t commit to building a home from the ground up without knowing how long this crucial part of the process may take. Some housing markets take much longer than others to process applications and issue your paperwork.
Want More Information About One-Time Close Loans?
We have extensively researched the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs.
We have spoken directly to licensed lenders that originate these residential loan types in most states, and each company has supplied us with the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service.
If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher-quality service.
We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allow for single-family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes).
In addition, the following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
Contact Us: Send Us Your Request – Spam Safe
Please send your email request to [email protected], which authorizes OneTimeClose.com to share your personal information with one mortgage lender licensed in your area to contact you.
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639), or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you is an eligible veteran, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines.
Most VA lenders will go up to $1,500,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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