One-Time Close Loans | FHA and VA Construction Loans
VA and FHA One-Time Close Construction Loans

Borrowers can bypass the cash down payment requirement if they already own the land and have enough equity to meet the minimum requirements.

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VA Loan - One-Time Close Construction Loan
FHA Loan - One-Time Close Construction Loan

One-Time Close Borrower Eligibility

The One-Time Close loan is a great option for first-time homebuyers looking for affordable options from the lack of existing homes on the market. But just like any other mortgage, there are some requirements that you, the borrower, are going to have to meet in order to be eligible for the One-Time Close Loan. All the regular guidelines for FHA and VA loans apply still apply, but there are some additional requirements as well.

The Importance of Credit Scores

As with all home mortgages, lenders set credit score requirements for the Single Close Loan. For FHA and VA, lenders typically require a minimum FICO score of 620 in the case of two borrowers, and 660 in the case of a single borrower.

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"As with any mortgage, there are certain eligibility requirements that need to be met to qualify for the Single Close Loan, whether it's by the FHA or VA."

Down Payment Requirements

Beaver talks about OTC eligibility requirements The great thing about FHA and VA Single Close Loans is that borrowers can bypass the cash down payment requirement fully if they already own the land and have enough land equity to meet the minimum investment requirement for the loan. Value of the land as determined by the appraiser (or the original cost of the land, depending on length of time of ownership and type of loan) less any lien payoff owed on the land is used to determine any land equity the borrower may have. The land can even be gifted, in which case all the standard FHA or VA guidelines would apply. However, if the purchase of the land is being financed as part of the loan, the FHA requires a 3.5 percent cash down payment. Maximum Loan-to-Value on FHA mortgages is 96.5%, and 100% on VA loans. LTV is based on the lower of acquisition cost (land cost/value + construction contract) or appraised value.

About Property Guidelines

The FHA and VA all mandate that any home built and purchased with a One-Time Close loan must serve as the borrower's primary residence. If you're thinking about building a vacation home or investment property, this is NOT the loan for you! The Single Close loan can be used to construct new manufactured homes (excluding single wide homes), modular homes, and site-built homes, all of which must typically be one-units.

Understanding the Loan Term

On FHA, lenders typically offer 15- and 30-year fixed rate loans for the Single Close option and the construction term is outside of the permanent mortgage term. VA One-Time Close loan lenders offer a 30-year, fully amortizing mortgage, but the construction term is inside of the mortgage term, so borrowers must qualify for a 29-year loan.

To get ready for a construction loan, it's good to think ahead. Work on reducing debt-to-income ratios, avoid applying for new lines of credit, and pay close attention to your credit report to avoid delays because of errors, outdated information, or other problems. Prepare for the approval process as you would for any financial loan, and make sure to keep the lines of communication open with your lender and builder!

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Articles, Updates, and Guidelines
OTC articles
One-Time Close Mortgage Scams

Major lenders are publishing warnings to One-Time Close borrowers and other mortgage applicants. These warnings are about sophisticated scams designed to fool even the most security-minded borrower, and there are important steps you should take in conjunction with your One-Time Close loan officer to avoid being swindled out of your cash to close.

How Long To Wait Before You Apply For A Construction Loan

The headline of this article might make some ask, “How long must I wait to apply for a construction loan after...what?” And there are several answers you should know about. The key here is to understand loan program standards and lender requirements equally.

Build On Your Own Lot in Georgia with an FHA / VA Construction Loan

In 2024, the FHA floor in the State of GA was increased to $498,257 and the FHA ceiling was increased to  $649,750 for single-family home loans in the State of GA.  Now may be the time to start looking into building a home that suits your exact needs.  Residents in Georgia are finding out that they can utilize these low-down payment construction programs in order to build a new home with the same underwriting guidelines and qualifications as if they were purchasing a resale.  Learn more about One-Time Close construction mortgages.  


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