One-Time Close Construction Loan Requirements
One-Time Close Construction Loan Requirements: Credit Scores
Expect to be held to a higher credit standard for a construction loan whether you are applying for an FHA One-Time Close mortgage, a VA construction loan, or the USDA version.
Expect your credit score requirements for a construction loan to be in the 600s--the VA, FHA, and USDA FICO score minimums are lower, but lender standards also apply and such standards usually fall in the 600 range. Single applicants applying for an FHA One Time Close loan can expect FICO score requirements at or near 660 in many cases.
Construction Loan Requirements: Interest Rates and Escrow
One-Time close loans to build instead of buy typically feature fixed-rate mortgages. Your interest rate will not go up or down in the construction phase, nor will it change when construction is over and you have moved into your new home. The rate you negotiate with the lender is the rate you will pay for the lifetime of the loan unless you refinance your mortgage.
You should expect to create an escrow account for your mortgage once it is approved as the construction loan process will require cash draws from the account to pay contractors, pay for materials, etc.
Down Payment Rules
FHA, VA and USDA construction loan programs offer loans to qualifying borrowers with no down payment if the applicant owns the property the home is being built upon and there is enough equity in the land to meet the minimum borrower investment requirement for loan approval.
In cases where the land is being purchased in conjunction with the mortgage and the land is financed as part of the loan, a down payment may be required depending on the program you choose.
Down Payment Assistance
Borrowers who are considering a construction loan but need down payment help should know that for One-Time Close construction loans, down payment assistance is generally not permitted.
Approved One-Time Close Housing Types
One-Time Close construction loans are for “typical” construction projects. Barndominiums and tiny homes, which are housing fads some applicants might be interested in pursuing, require specialized construction that falls outside the scope of the FHA, USDA, and VA One-Time Close programs.
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.
