One-Time Close Loans: Conventional, FHA, Or VA?
October 18, 2022
What makes government-backed single-close construction loans different from their conventional equivalents?
Should you choose an FHA or a VA One-Time Close loan over a conventional construction loan? Both conventional loans and government-backed mortgages offer 30-year, fixed-rate loan terms, options to refinance, and for FHA and conventional mortgages, mortgage insurance premiums.
The decision-making process for a loan you apply for to build your house from the ground up should include serious consideration of your financial needs and goals. Do you plan to stay in the house for the full term of the loan? Do you anticipate selling it down the line? Those issues may affect choices all the way up to the size of your down payment.
If you plan to stay in the home, a larger down payment is a smart idea. The less you pay in interest over a 30-year loan, the better and you will pay less in interest with a smaller loan balance. It’s that simple.
If you have good credit and want to put more down, a conventional single-close construction loan might be your option. But if you have the option to get a low 3.5% down payment such as with an FHA One-Time Close loan, and you want to save more upfront on the mortgage, the FHA option might be for you.
But down payments aren’t the only issue to consider. How much will your conventional loan cost you upfront compared to the FHA mortgage? If you are a veteran with the option to consider a VA construction loan with its zero down payment option, it’s wise to compare all three loan options side-by-side.
And there are questions to ask when doing those comparisons. Does the conventional lender charge a fee for early payoff of the loan? Ask that question up front and determine how much you will be charged for the privilege of paying off your loan early, where applicable. Government-backed mortgages typically do not allow the lender to penalize you for an early payoff.
Comparing government-backed construction loans to conventional single-close mortgages means looking at a range of issues. Conventional loans are harder to qualify for in part because they have no government guarantee.
Conventional loans may permit you to build an investment property, but the type of construction loan you get in those circumstances may be different from the One-Time Close options we are discussing here. Why?
Because One-Time Close loans (in our context) are for owner-occupiers who plan to live in the house once it’s ready. You will find that government-backed loans have refinance loan options (the “Streamline” refinance offered by FHA and VA lenders) that have no VA/FHA-required credit check or appraisal. Ask your lender which conventional construction loan offers that equivalent.
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 $1,500,000 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.
Should you choose an FHA or a VA One-Time Close loan over a conventional construction loan? Both conventional loans and government-backed mortgages offer 30-year, fixed-rate loan terms, options to refinance, and for FHA and conventional mortgages, mortgage insurance premiums.
The decision-making process for a loan you apply for to build your house from the ground up should include serious consideration of your financial needs and goals. Do you plan to stay in the house for the full term of the loan? Do you anticipate selling it down the line? Those issues may affect choices all the way up to the size of your down payment.
If you plan to stay in the home, a larger down payment is a smart idea. The less you pay in interest over a 30-year loan, the better and you will pay less in interest with a smaller loan balance. It’s that simple.
If you have good credit and want to put more down, a conventional single-close construction loan might be your option. But if you have the option to get a low 3.5% down payment such as with an FHA One-Time Close loan, and you want to save more upfront on the mortgage, the FHA option might be for you.
But down payments aren’t the only issue to consider. How much will your conventional loan cost you upfront compared to the FHA mortgage? If you are a veteran with the option to consider a VA construction loan with its zero down payment option, it’s wise to compare all three loan options side-by-side.
And there are questions to ask when doing those comparisons. Does the conventional lender charge a fee for early payoff of the loan? Ask that question up front and determine how much you will be charged for the privilege of paying off your loan early, where applicable. Government-backed mortgages typically do not allow the lender to penalize you for an early payoff.
Comparing government-backed construction loans to conventional single-close mortgages means looking at a range of issues. Conventional loans are harder to qualify for in part because they have no government guarantee.
Conventional loans may permit you to build an investment property, but the type of construction loan you get in those circumstances may be different from the One-Time Close options we are discussing here. Why?
Because One-Time Close loans (in our context) are for owner-occupiers who plan to live in the house once it’s ready. You will find that government-backed loans have refinance loan options (the “Streamline” refinance offered by FHA and VA lenders) that have no VA/FHA-required credit check or appraisal. Ask your lender which conventional construction loan offers that equivalent.
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 $1,500,000 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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