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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June 21, 2023Before agreeing to use them on your One-Time Close Construction Loan project, what should you know about a contractor, builder, or another service provider? In addition to knowing the builder's reputation online and in the local community, you should ask some very specific questions to make the most informed decision about who to use.
June 14, 2023Should you build a home or buy existing construction? This isn't a dilemma for those who have decided not to buy an existing home, but some borrowers only look at dollar signs (at first) when comparing their build-or-buy options.
June 7, 2023If you plan on building a home with a One-Time Close construction loan, there are some important considerations to make when planning and saving for your loan. What makes you a more attractive borrower to a lender who has to justify approving your single-close construction loan? We examine the possibilities below.
