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.
December 6, 2023Government agencies update the conforming loan limits for conventional and government-backed home loans every year. The 2024 loan limits issue is important for those considering their construction loan options because the updated limits could increase the borrowing power of some looking to build a house with a single closing day and a single credit check.
November 28, 2023FHA loans and VA mortgages are necessary low-to-no down payment options for first-time home buyers, and the programs are also open to other financially qualified applicants. What do you need to know about these loans? The fact that they can be used to build a new house and are not limited to existing construction sales. What is important to know about these options?
November 16, 2023Are you tempted to build a home from the ground up with an FHA construction loan or a VA One-Time Close mortgage? Building is better for some than buying existing construction but there are some important factors to consider.
