Can I Build A Home With An Adjustable-Rate Mortgage?
November 15, 2022
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 are interested in building your own home on your own land (or land you purchase in conjunction with the construction loan), you are likely examining your options with an eye on rising interest rates.
Are there ways to mitigate higher mortgage rates and get into a more affordable loan?
With mortgage rates higher in 2022, many borrowers may be tempted to consider applying for an adjustable-rate mortgage.
And many of the home loan programs that may offer construction loans do come in both fixed-rate and adjustable-rate options. But if you are in the market for a One-Time Close mortgage, the issue might be lender willingness rather than the program itself.
Did you know that on paper, the FHA 203(k) Rehabilitation Loan (used as a loan to buy and renovate a fixer-upper) is offered as an adjustable-rate mortgage?
But a 203(k) is not the same as a construction loan, and even then it’s up to the lender to offer the ARM loan option if they so choose.
Is An Adjustable-Rate Mortgage Possible For A Single-Close Transaction?
Before we answer that one, it’s important to note that construction loans may feature an adjustable rate for the construction phase of the loan, which will convert to a fixed-rate mortgage when the building project is done and you are cleared to move into the property.
The adjustable-rate period ends, and for typical construction loans, you may find the lender unwilling to keep the adjustable rate.
What Are My Options For Reducing The Interest Rate?
Since you may not be likely to find a One-Time Close loan at an adjustable mortgage rate, you can discuss other options with the lender such as buying discount points, and you should definitely consider refinancing as soon as rates go back down to more borrower-friendly levels.
The worst option is to build the home without a strategy to get into a lower rate as soon as you can.
There are other options that could help control the cost of your loan over time. One is to make a larger down payment, reducing the principal balance and being charged less over time for that balance.
Loan Repayment Strategies
You can also consider strategies that help pay down your loan faster, such as paying the same mortgage payment amount each month but paying it in 50% installments twice a month.
That lowers your principal balance by adding an extra payment each year. If you pay a single full payment each month of $1000, you make 12 payments on your construction loan in a year. But if you cut that $1000 in half and pay $500 every two weeks, you have made 26 payments of $500. 12x1000=$12,000 while 26 x $500 = $1300.
You have made an extra house payment for the year without ever having spent more than you owe on the mortgage each month.
Are there ways to mitigate higher mortgage rates and get into a more affordable loan?
With mortgage rates higher in 2022, many borrowers may be tempted to consider applying for an adjustable-rate mortgage.
And many of the home loan programs that may offer construction loans do come in both fixed-rate and adjustable-rate options. But if you are in the market for a One-Time Close mortgage, the issue might be lender willingness rather than the program itself.
Did you know that on paper, the FHA 203(k) Rehabilitation Loan (used as a loan to buy and renovate a fixer-upper) is offered as an adjustable-rate mortgage?
But a 203(k) is not the same as a construction loan, and even then it’s up to the lender to offer the ARM loan option if they so choose.
Is An Adjustable-Rate Mortgage Possible For A Single-Close Transaction?
Before we answer that one, it’s important to note that construction loans may feature an adjustable rate for the construction phase of the loan, which will convert to a fixed-rate mortgage when the building project is done and you are cleared to move into the property.
The adjustable-rate period ends, and for typical construction loans, you may find the lender unwilling to keep the adjustable rate.
What Are My Options For Reducing The Interest Rate?
Since you may not be likely to find a One-Time Close loan at an adjustable mortgage rate, you can discuss other options with the lender such as buying discount points, and you should definitely consider refinancing as soon as rates go back down to more borrower-friendly levels.
The worst option is to build the home without a strategy to get into a lower rate as soon as you can.
There are other options that could help control the cost of your loan over time. One is to make a larger down payment, reducing the principal balance and being charged less over time for that balance.
Loan Repayment Strategies
You can also consider strategies that help pay down your loan faster, such as paying the same mortgage payment amount each month but paying it in 50% installments twice a month.
That lowers your principal balance by adding an extra payment each year. If you pay a single full payment each month of $1000, you make 12 payments on your construction loan in a year. But if you cut that $1000 in half and pay $500 every two weeks, you have made 26 payments of $500. 12x1000=$12,000 while 26 x $500 = $1300.
You have made an extra house payment for the year without ever having spent more than you owe on the mortgage each month.
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.
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Articles, Updates, and Guidelines
Construction Loan Limits
November 9, 2023At the time of this writing, the FHA is preparing to release 2024 FHA loan limits for purchase loans, construction loans, and renovation mortgages. If you are building a home and are unsure what loan limits may apply to you, keep reading. We address this issue below. Some might wonder if delaying their loan application until the new year is a good idea, assuming loan limits will be higher.
How To Compare Construction Loan Lenders
November 3, 2023If you are building a home for the first time, finding the right construction loan lender for you might seem daunting, especially when comparing lenders and deciding which one has the best options. Shopping around for the right construction loan means comparing several online reputations, user reviews, and even Better Business Bureau reports in cases where you are not sure about one company or another.
Before You Build
October 25, 2023What do you need to know when comparing contractors on your journey to build a dream home from the ground up? If you want a One-Time Close construction loan, you will need to take a few steps in the planning stages to make sure your project is as hassle-free as possible.
