Issues To Consider Before Applying For Your Construction Loan
May 24, 2023
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.
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. No SSN required • No credit check • 100% free to get started
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.
If you have never built a home with a Single-Close construction loan before, part of the process may seem confusing.
For example, why do some lender websites tell you to find a builder before you apply for the loan, only to tell you later the lender may need to approve your contractor?
These are essential questions to answer before applying for a construction loan.
What To Know About Construction Loans: Finding a Builder
The dilemma mentioned above? Where you are asked to go find a builder only to learn later that the lender must approve the builder?
This partly exists because government-backed One-Time Close loans such as FHA or VA One-Time Close mortgages have specific rules about who can do the labor. The contractor must be licensed to do the work, and their permits and other documentation must be current.
So yes, you must locate a builder, and the lender must approve them.
FHA Construction Loans: Payments During Construction
You may not be asked to pay on your mortgage until the construction phase is complete. But that does not mean your 30-year mortgage begins at the end of the project. The clock starts ticking on your mortgage when it is closed.
If there is a three-month difference between the closing date and the end of the construction, you should anticipate having to pay for those three months later down the line--your mortgage is not extended by three months to accommodate.
It is smart to start putting aside mortgage payments starting in the month you close the deal to avoid a balloon payment later on.
Will your loan agreement require you to make that balloon payment after construction ends? At the end of the loan? A different time frame? Ask about this aspect of the loan before you commit.
Credit Requirements
On paper, you may find identical credit requirements for government-backed construction loans to other FHA loans or VA mortgage options.
But your lender will likely require higher FICO scores to be approved for a construction loan. These mortgages are more complex and expensive than typical purchase loans; your lender must ensure you can realistically afford the new mortgage.
For example, why do some lender websites tell you to find a builder before you apply for the loan, only to tell you later the lender may need to approve your contractor?
These are essential questions to answer before applying for a construction loan.
What To Know About Construction Loans: Finding a Builder
The dilemma mentioned above? Where you are asked to go find a builder only to learn later that the lender must approve the builder?
This partly exists because government-backed One-Time Close loans such as FHA or VA One-Time Close mortgages have specific rules about who can do the labor. The contractor must be licensed to do the work, and their permits and other documentation must be current.
So yes, you must locate a builder, and the lender must approve them.
FHA Construction Loans: Payments During Construction
You may not be asked to pay on your mortgage until the construction phase is complete. But that does not mean your 30-year mortgage begins at the end of the project. The clock starts ticking on your mortgage when it is closed.
If there is a three-month difference between the closing date and the end of the construction, you should anticipate having to pay for those three months later down the line--your mortgage is not extended by three months to accommodate.
It is smart to start putting aside mortgage payments starting in the month you close the deal to avoid a balloon payment later on.
Will your loan agreement require you to make that balloon payment after construction ends? At the end of the loan? A different time frame? Ask about this aspect of the loan before you commit.
Credit Requirements
On paper, you may find identical credit requirements for government-backed construction loans to other FHA loans or VA mortgage options.
But your lender will likely require higher FICO scores to be approved for a construction loan. These mortgages are more complex and expensive than typical purchase loans; your lender must ensure you can realistically afford the new mortgage.
FHA, VA, and USDA: One-Time Close LoansWant 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.
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. No SSN required • No credit check • 100% free to get started
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.
See Your Credit Scores From All 3 Bureaus
Do you know what's on your credit report?
Learn what your score means.
Articles, Updates, and Guidelines
One-Time Close Construction Loan Issues: Weather Delays
October 22, 2024One-Time Close construction projects are subject to many variables that can change their timelines. Weather is a particularly unpredictable factor to consider, and depending on where you live, issues may range from snow and rain to extreme temperatures. Weather is a variable that can cause construction disruptions, delays, potentially increased costs, and frustration for borrowers. Knowing that upfront can help, especially when it is time to plan your contingency fund.
Build On Your Lot in Illinois using an FHA or VA Construction Loan
October 21, 2024There is a FHA and VA government backed One-Time Close construction to permanent loan program available in Illinois for qualified applicants who are looking to build a brand-new home versus a resale.
Using a One-Time Close Residential Construction Loan to Build a Residence
October 15, 2024Building a new home can be exciting. It can also be a complex process, and it pays to understand as much of it as possible while planning your home loan. If you want to use a one-time close residential construction loan to build your home from the ground up, there are three things to consider.
