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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January 11, 2024The Federal Reserve Bank of St. Louis estimates there were just under 18 million veterans in 2023. Add to that number of members of the Guard and Reserve, and you get approximately 19 million 360 thousand people. What do they need to know before taking advantage of their VA home loan benefits or the FHA One-Time Close construction loan program to build a home on their lot or land they buy with the loan?
January 4, 2024What makes an FHA One-Time Close construction loan (or any other type) different from a home loan to buy an existing home? Aside from the obvious aspects, such as needing to own or buy a plot of land to build on and hiring contractors to do the work to build the property, how do single-close construction loans differ?
January 3, 2024There is an FHA / VA backed One-Time close construction to permanent financing program currently available to eligible veterans with $0 down payment and to others with 3.5% down payment. Current lower home inventory levels may make it a good time to start planning to build a home utilizing this Single Close program.
