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One-Time Close Construction Loan Down Payment Rules


One-Time Close Construction Loan Down Payment Rules
What do you need to know about One-Time Close construction loan down payments? The first thing you need to understand is that in typical cases a down payment is always required when applying for a conventional single-close construction loan. 

But participating construction lenders who offer VA and FHA loans may be able to offer you lower down payment options through one of those programs.

Conventional Construction Loan Down Payment Requirements

Down payment amounts for conventional loans will vary depending on the lender, your credit scores, and other variables but in general, you will need to put 20% down if you want to avoid paying mortgage insurance. For construction loans, you may be asked to put between 5% and 20% down.

Down payment assistance is typically not permitted for conventional construction mortgages.

VA Construction Loan Down Payment Requirements

VA mortgages come with a no-money down option for its home loans, and that includes construction loans. A zero-down construction loan is a major advantage for any borrower, but VA mortgages are only for those who have qualifying military service. 

These loans are not offered to the general public, but if you qualify for one, a VA construction loan is a very good option to have.

FHA One-Time Close Construction Loan Down Payment Rules

The FHA One-Time Close construction loan requires a minimum 3.5% down payment. These construction loans are government-backed, which is why the down payment requirement is lower. 
Down payment assistance programs may technically be available to help a borrower with a construction loan, but you may find many participating lenders simply won’t approve construction loans where down payment help is needed.

What To Know About Down Payments On Construction Loans

No matter what type of construction loan you choose, the lender will have strict rules governing the source of your down payment money and how it must be handled in order to qualify. Your down payment money cannot come from a payday loan, for example, and it must not come from a credit card cash advance. 

Your down payment cannot be sourced from any non-collateralized loan like a pink slip loan or those mentioned above. No third party with a financial stake in the outcome of the mortgage loan transaction may provide down payment money for a home loan guaranteed by the FHA, the VA, USDA, etc.

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 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 lenders will go up to $1,000,000 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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Articles, Updates, and Guidelines
OTC articles
Using The Right Kind Of Loan To Build Your Home

If you want to build your own home from the ground up, or you want to purchase a fixer-upper, your loan officer will help you to apply for the right loan for your needs. Not all mortgages are alike, and the nature of the purchase often dictates the type of loan you get. For example, building a house on land you own (or purchase as part of the project) would require a single-close construction loan.

Construction Loan Down Payments

One-Time Close construction loans have unique requirements, Lenders who offer these loans often have higher credit score requirements and there are some unique issues for those who choose to build rather than buy existing construction.

Planning Your Construction Loan

If you want to build your home from the ground up on your own lot, the One-Time Close construction loan, also known as a single-close construction loan, is a good option to consider. And when you consider those options, there are some questions to ask that are a bit further down on most people’s “need-to-know” list but should be asked regardless.


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