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

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

- Build a Home on Your Own Lot -
VA Loan - One-Time Close Construction Loan
FHA Loan - One-Time Close Construction Loan
USDA 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, VA, and USDA 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. For USDA loans, it is necessary to have two applicants with a minimum score of 620.

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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, VA, or USDA."

Down Payment Requirements

Beaver talks about OTC eligibility requirements The great thing about FHA, VA, and USDA 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, VA, or USDA 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 and USDA loans. LTV is based on the lower of acquisition cost (land cost/value + construction contract) or appraised value.

About Property Guidelines

The FHA, VA, and USDA 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 and USDA One-Time Close loans 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. Note: Annual fees will typically be escrowed to cover the construction period for up to 12 months in the case of a USDA 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
VA One-Time Close Construction Loans for Military Officers

The biggest hurdle for some home buyers is the down payment. VA construction loans allow zero down, and borrowers who receive or are eligible to receive VA compensation for service-connected disabilities are allowed to apply for an exemption to the VA loan funding fee.

The Base Home Sales Price for One-Time Close Loans

What is the base home sale price? If you are interested in building a home on your own lot using a One-Time Close construction loan, this is a term you should be familiar with; construction loans are different from purchase loans for a variety of reasons but one big one is how the cost of the mortgage is calculated.

One-Time Close Facts for First-Time Buyers

Sometimes half the battle in deciding what type of home loan to apply for is knowing what you really want out of your home. As in, do you need a home designed and built from the ground up on your own lot instead of purchasing someone else’s house?


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