Building Your Home On Your Own Lot: Questions To Ask
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.
FHA, VA, and USDA: One-Time Close Loans
Want More Information About One-Time Close Loans?We have done extensive research on 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 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 allows 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, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.
All known FHA/VA One-Time Close Lenders known to our company will not allow a borrower to act as their own contractor, whatsoever. There cannot be self-builds, relative builds, or employer builds.
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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 are eligible veterans, 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 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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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.
