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.
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October 26, 2022If you want to build a home with a One-Time Close construction loan as we come to the last few months of 2022, you are thinking about building during a time when the prices for existing construction are finally beginning to slow down. A lack of inventory is one of the reasons why prices went up this year. It's also a good motivator for people to build instead of buying the more scarce existing construction homes that might be caught up in hot bidding wars.
October 18, 2022What makes government-backed single-close construction loans different from their conventional equivalents? Should you choose an FHA or a VA One-Time Close loan over a conventional construction loan? Both conventional loans and government-backed mortgages offer 30-year, fixed-rate loan terms, options to refinance, and for FHA and conventional mortgages, mortgage insurance premiums.
October 13, 2022An article published by National Public Radio points out that house prices have increased as much as 40% in the last 24 months. That has left some potential borrowers wondering if it's smart to build a new home right now. The NPR report also mentions the fact that existing construction prices may have hit their peak in June of 2022, and since then prices on those homes have come down by as much as six percent.
