The "FHA" One-Time-Close Loan
Single Close Loans allow you to wrap up the financing of lot purchase, construction and permanent mortgage into one loan insured by the FHA. Under this option, you can apply for a 15- or 30-year loan with a fixed rate that’s locked in before construction on your new home begins.
With a Single Close Loan comes a single set of closing costs. These costs can be partially paid for you, since the FHA allows interested party contributions (sometimes referred to as seller concessions, although commonly paid by the builder in the case of a construction-to-permanent loan) up to 6 percent of the total acquisition cost.
What is an FHA Loan?
The Federal Housing Administration (FHA) is a government agency within the U.S. Department of Housing and Urban Development (HUD). In an effort to stimulate America’s housing market and assist Americans in securing safe and affordable housing, the FHA insures mortgages on single and multifamily homes.
The FHA offers homebuyers a number of mortgage options, including the One-Time Close Construction-to-Permanent loan. The loan is provided by private, FHA-approved lenders and is backed by the FHA, giving lenders peace of mind about approving borrowers for large mortgages.
Who Can Apply
While only veterans and rural residents can apply for loans with the VA, securing a Single Close Loan with the FHA is easier for other homebuyers. It also allows you to take advantage of the FHA’s lenient borrower guidelines.
There is a low down payment requirement of 3.5 percent. If you already own the land on which your new home is being built and have equity in the land, the equity can be used towards the 3.5% down payment. Furthermore, the down payment can be paid for entirely with "gift funds."
Most lenders typically have a credit score requirement of at least 620. The FHA also requires proof of employment and income, and no late or missed payments in the last 12 months.
Do you know what's on your credit report?
Learn what your score means.
March 28, 2023Spring of 2023 may be an excellent time to think about building a home on your own lot. Why? In the last week of March 2023, the headlines were full of news about falling mortgage loan interest rates in the wake of the Fed's announcement of another rate hike. The hike isn't what made rates fall. It is what the Fed said about future hikes that made the difference.
March 21, 2023If you are building a home using a single-close mortgage, you likely already know the process is more complex than buying an existing home. That shouldn't stop you from building the house you want, but there are critical mistakes to avoid when planning your home. How do you know you are ready to start building your home?
March 14, 2023Are you ready for a construction loan? There are some simple questions to ask if you are not sure. Building your own home on your own lot or on land you buy for the project is an important investment, and you want to ensure you have covered all the following topics before committing to a One-Time Close lender.
