How Construction Loans Vary
April 12, 2024
What do we mean by our headline? There are many ways VA and FHA One-Time Close construction loans differ from other types of mortgages, but how do single-close loans differ from each other?
Each single-close loan program has unique features for the loan's standard features, as we’ll explore below.
One-Time Close Construction Loan Down Payments
There is no standardized down payment requirement for all One-Time Close mortgages. The VA has a zero-down option, the FHA requires a minimum of 3.5% down, and conventional loans may require up to 20% down depending on the lender, the loan, and other variables.
One detail is found across many construction loans.
Your participating VA or FHA lender may not permit downpayment assistance for these loans, unlike purchase loans for existing construction. It never hurts to ask, but don’t expect to be approved for a construction loan without downpayment assistance if you can’t get it.
Occupancy Requirements
VA and FHA construction loans require at least one borrower to be a full-time home resident as a condition of loan approval.
You cannot typically use a government-backed construction loan to build an investment property you won’t live in as your home address. Conventional requirements in this area may vary depending on the lender.
Mortgage Insurance
Not to be confused with homeowner’s insurance, mortgage insurance is a tool for the lender if the borrower defaults on the loan.
VA loans have no VA-required mortgage insurance. FHA construction loans require mortgage insurance for either 11 years or the full term, depending on your down payment.
Conventional loans typically require mortgage insurance unless you make a 20% down payment.
Early Payoff Penalties
Conventional construction loans may include a penalty for early loan repayment, whether through refinancing, selling the home, or making larger payments.
VA and FHA construction loans do not permit the lender to charge a fee for you to pay the mortgage off ahead of schedule. Your lender may have a specific procedure for making the final payment, be sure to ask what that may be before you need to know.
Want More Information About One-Time Close Loans?
We have extensively researched 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 with the guidelines for their products. We can connect you with mortgage loan officers who work for lenders who 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 allow 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: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
Contact Us: Send Us Your Request – Spam Safe - FHA / VA One-Time Close
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.
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 is an eligible veteran, 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 VA 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.
Each single-close loan program has unique features for the loan's standard features, as we’ll explore below.
One-Time Close Construction Loan Down Payments
There is no standardized down payment requirement for all One-Time Close mortgages. The VA has a zero-down option, the FHA requires a minimum of 3.5% down, and conventional loans may require up to 20% down depending on the lender, the loan, and other variables.
One detail is found across many construction loans.
Your participating VA or FHA lender may not permit downpayment assistance for these loans, unlike purchase loans for existing construction. It never hurts to ask, but don’t expect to be approved for a construction loan without downpayment assistance if you can’t get it.
Occupancy Requirements
VA and FHA construction loans require at least one borrower to be a full-time home resident as a condition of loan approval.
You cannot typically use a government-backed construction loan to build an investment property you won’t live in as your home address. Conventional requirements in this area may vary depending on the lender.
Mortgage Insurance
Not to be confused with homeowner’s insurance, mortgage insurance is a tool for the lender if the borrower defaults on the loan.
VA loans have no VA-required mortgage insurance. FHA construction loans require mortgage insurance for either 11 years or the full term, depending on your down payment.
Conventional loans typically require mortgage insurance unless you make a 20% down payment.
Early Payoff Penalties
Conventional construction loans may include a penalty for early loan repayment, whether through refinancing, selling the home, or making larger payments.
VA and FHA construction loans do not permit the lender to charge a fee for you to pay the mortgage off ahead of schedule. Your lender may have a specific procedure for making the final payment, be sure to ask what that may be before you need to know.
Want More Information About One-Time Close Loans?
We have extensively researched 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 with the guidelines for their products. We can connect you with mortgage loan officers who work for lenders who 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 allow 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: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
Contact Us: Send Us Your Request – Spam Safe - FHA / VA One-Time Close
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.
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 is an eligible veteran, 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 VA 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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