One-Time Close Loans | FHA and VA Construction Loans
Learn all about the VA and FHA versions of the One-Time Close Loan.

Construction on your new home can begin once the One-Time Close loan goes to closing. Payments are made to the builder on a work-completed basis.

- Build a Home on Your Own Lot -
VA Loan - One-Time Close Construction Loan
FHA Loan - One-Time Close Construction Loan

From Construction Phase to Move-In Day

You've closed on your One-Time Close Loan, and it's time for construction on your new home to begin! Your lender will start to disburse "draws" to your contractor over time as the building progresses.

Draw Disbursement

With a Single Close loan, payments are made to the builder on a work-completed basis. Draw requests must be submitted by the builder, along with an itemized report of the progress made on the home. An additional assessment comes from an independent, third-party inspection service that determines the percentage of work completed. Once these reports are received by the lender and the draw amount determined, the disbursements are made to your builder. Some lenders may flow the funds through the closing/escrow agent, while others may disburse directly to the builder.

Apply Now for Your One-Time Close Constuction Loan
"Once you've closed on the mortgage, construction on your new home can begin. This time period can vary, but typically doesn't exceed 9 months."

It Begins With the Start-up Draw

Beaver talks about OTC home construction issuesA start-up draw might be paid to your contractor after closing is finalized. This includes the lot payoff amount, less any down payment. Your builder receives the final draw once the project is completed. Lenders may require additional documentation before making this last payment, such as a final appraisal inspection, an endorsement from the Title Company, and proof of the homeowner's insurance policy.

Construction Period

Whether it's FHA or VA, most lenders don't want to see the construction period on your new home exceed 9 months. Every home is different, which means that this timeframe can vary according to the location and type of home. Our lenders have provided average construction periods for the different, one-unit homes financed via One-Time Close loans:

  • Site-Built homes -- 280 days average
  • Modular homes -- 240 days average
  • Manufactured homes -- 200 days average

Amortization and Move-In

During the interim construction period—however long it may be—you are typically not required to make payments on the loan or pay the construction interest. Your builder is responsible for the interest during the construction period, which is an incentive to finish building as quickly as possible. Payments are normally due once the project is complete, all required documents have been provided by your builder to the lender, and the construction portion of the loan converts to the permanent portion of the loan. Your permanent mortgage begins amortization no later than the first of the month following 60 days from the issuance of the certificate of occupancy by the local municipality or final compliance inspection, whichever comes later. No re-qualifying, no increase to your interest rate, and no additional closing costs!

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Articles, Updates, and Guidelines
OTC articles
One-Time Close Loans And Insurance Considerations

When building a home, there are important considerations to make for mortgage insurance and the types of policies you may also need if you are building in an area known for natural disasters. Mortgage insurance and hazard insurance are not the same things and even for homeowner’s insurance policies, there may be a difference in coverage for certain types of incidents like floods or fires.

Understanding Your One-Time Close Mortgage Payment

Building a home on your own lot requires you to do a variety of things before you can accept the keys and move into your brand-new, never-before-owned home. Choosing the lender, selecting the builder, choosing your floor plan, how much you will put down and other decisions are all big parts of the process.

Can I Build A Home With An Adjustable-Rate Mortgage?

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.


-- Find More Articles in the OTC Library --

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