Build On Your Own Lot Or Renovate?
March 8, 2024
If you want to build a home from the ground up on your own lot using an FHA One-Time Close construction loan, you need to know some things before you start. We examine some of those important issues below.
Construction Times
According to Census Bureau data, the construction time for a single-family house is approximately seven months. This does not consider delays due to supply chain issues, weather or natural disasters, or cost overruns, but it’s a good benchmark to start with.
Compare that time frame to how long it could take to renovate an existing home. Some sources estimate that a home renovation project could take two to six months depending on the size and scope of the work.
Bottom line? Building from the ground up takes time, but so would a gut rehab on a building you buy with a fixer-upper loan. When the rehab is more extensive, the labor time can be almost as long as a One-Time Close construction loan project.
Present Costs, Future Costs
It’s not fair to compare the price structures of a rehab loan to a construction loan, but in general, you can expect the destination of your loan funds to be more or less the same.
Where applicable, you must pay for inspections and any required title searches on the land you build on. You also need to pay contractors and arrange services.
Buying an existing home may cost less in some ways, but building from the ground up means knowing exactly how old your roof, plumbing, and electrical systems are and when they could need to be replaced.
Having that warning about future expenses is important to a certain type of borrower, and construction loans offer that sort of security.
Down Payment Issues
You may be asked to make a higher down payment to avoid mortgage insurance on a construction loan. FHA mortgage insurance is required for either 11 years or the loan's lifetime, depending on various factors, including the amount of your down payment.
VA construction loans do not require VA mortgage insurance, but conventional construction loans typically require 20% down to avoid mortgage insurance. Mortgage insurance issues and down payment issues are closely tied.
Did you know you can finance the FHA upfront mortgage insurance premium required at closing time? You can finance 100% of the premium or pay it upfront in cash on closing day.
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 who know the product well and consistently provide quality service.
If you would like to be contacted by a licensed lender in your area, please respond 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 - FHA / VA One-Time Close
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.
Construction Times
According to Census Bureau data, the construction time for a single-family house is approximately seven months. This does not consider delays due to supply chain issues, weather or natural disasters, or cost overruns, but it’s a good benchmark to start with.
Compare that time frame to how long it could take to renovate an existing home. Some sources estimate that a home renovation project could take two to six months depending on the size and scope of the work.
Bottom line? Building from the ground up takes time, but so would a gut rehab on a building you buy with a fixer-upper loan. When the rehab is more extensive, the labor time can be almost as long as a One-Time Close construction loan project.
Present Costs, Future Costs
It’s not fair to compare the price structures of a rehab loan to a construction loan, but in general, you can expect the destination of your loan funds to be more or less the same.
Where applicable, you must pay for inspections and any required title searches on the land you build on. You also need to pay contractors and arrange services.
Buying an existing home may cost less in some ways, but building from the ground up means knowing exactly how old your roof, plumbing, and electrical systems are and when they could need to be replaced.
Having that warning about future expenses is important to a certain type of borrower, and construction loans offer that sort of security.
Down Payment Issues
You may be asked to make a higher down payment to avoid mortgage insurance on a construction loan. FHA mortgage insurance is required for either 11 years or the loan's lifetime, depending on various factors, including the amount of your down payment.
VA construction loans do not require VA mortgage insurance, but conventional construction loans typically require 20% down to avoid mortgage insurance. Mortgage insurance issues and down payment issues are closely tied.
Did you know you can finance the FHA upfront mortgage insurance premium required at closing time? You can finance 100% of the premium or pay it upfront in cash on closing day.
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 who know the product well and consistently provide quality service.
If you would like to be contacted by a licensed lender in your area, please respond 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 - FHA / VA One-Time Close
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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