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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July 5, 2023What must you know before you have a home built on your own lot using a One-Time Close Construction Loan? Some issues may be specific to a program like the FHA One-Time Close program versus the VA alternative or even a conventional equivalent. But other issues apply no matter what type of loan you are using to build your dream home.
July 3, 2023There is a government backed VA / FHA One-Time close construction to permanent loan currently available with little or no down payment to qualified applicants. With fewer homes available in the market, now may be an excellent time to consider building a new home.
June 28, 2023Some serious issues can delay a One-Time Close Construction Loan and the completion of your project, putting you over deadline and even over budget. This article is not about the obvious issues like not applying for more credit after you've applied for a mortgage or avoiding a significant change in FICO scores after initial loan approval. Yes, those problems can delay your loan.
