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.
July 1, 2022What 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.
June 22, 2022What do you need to know about One-Time Close mortgages before you apply for one? There are some issues to be aware of that can save you time and frustration--knowing before you start filling out application forms is a big help!
May 30, 2022Did you know that even as a first time borrower, you may be eligible for a One-Time Close construction loan that allows the borrower to build a home on their own lot rather than buying an existing house?
