Mistakes to Avoid When Building A New Home
When planning to build a home with a One-time Close construction loan, there are some basic expectations you should have going into the process.
For example, you should not assume it is possible to build a home without a down payment. But that's a very obvious issue. What about more complex aspects of building a home on your own lot?
Some worry about going over or under budget, and it's true that you can apply for a mortgage loan to build a home without knowing all the costs associated with such a project.
You may find that the costs of building are higher than you expect. In such cases it pays to have a contingency reserve, but what about times when the construction loan actually does not use the entire loan amount?
Believe it or not, it can happen; don’t expect to use every single dollar of those loan funds and it's pointless to try. The best advice is to plan the home you want and plan on the amount of money you need to get the job done with some extra set aside just in case.
And when doing all that, it pays to anticipate issues that could result in higher costs. You might want budget fixtures and features for your new home, but how long will they last and does it make sense to pay a bit more for things that will last longer in the home?
Home loans for construction and renovation sometimes feature some of the same concerns. If you have ever used a rehab loan before you'll find some common advice that can apply to construction loans, too. For example, don’t expect to use the whole loan to build your home.
Your project may come in under budget. In such cases, you should not expect cash back. Loan funds can only be used for approved purposes.
Borrowers using a rehab loan to renovate a fixer-upper would ask in this stage of planning whether there are extensive projects such as the replacement of an entire electrical system or an entire, outdated heating and cooling system.
But with a construction loan, the issues have more to do with the quality of the new fixtures, appliances, and other features in the home.
Instead of borrowing with an eye on replacing these features, building your home means deciding whether to spend more upfront for better quality items you won't need to replace in the earliest years of the loan, or opting for a more affordable option you may need to replace sooner rather than later.
The lifespan of the features you pay for should definitely be a factor in your decision-making process.
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 23, 2024One-time close construction loans through the VA and FHA programs are available to any financially qualified borrower, whether they are first-time home buyers or experienced homeowners. All VA loans have a military or uniformed service requirement, but FHA mortgages are for any financially qualified borrower. What do you need to know about these construction loans before saving for one?
May 17, 2024If you would rather build your own new home than buy somebody else’s dream house, you have many options, including FHA One-Time Close mortgages and VA construction loans. No matter your loan type, the need for third parties, including builders, inspectors, and appraisers, is real. You likely won’t be allowed to act as your own builder, electrician, or plumber. Screening these third-party services is important.
May 10, 2024When you decide to build your dream home, one important step is comparing participating One-Time Close lenders for VA and FHA options. When you are ready to start shopping around for a lender, it is smart to list standard questions to ask each loan officer or financial institution. What questions should you ask when comparing OTC lenders?
