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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April 18, 2023If you want to build a home with a One-Time Close construction loan and are new to the process, there are some things to watch out for. Do you know when a contractor proposes a legitimate workaround to a problem compared to taking a possibly illegal shortcut? Keep reading; we explore some of those scenarios below.
April 11, 2023Why choose an FHA or VA One-Time Close Construction Loan over a conventional equivalent? There are good reasons to consider doing so. Borrowers experienced with government-backed mortgages know that the interest rates can be more competitive than conventional loans thanks to the government guarantee of these loans, so why don't more people explore their options under VA and FHA single-family construction loan options?
April 4, 2023The Department of Veterans Affairs has announced changes to the VA loan funding fee, directly affecting those who want to build a home from the ground up using a VA One-Time Close construction loan.
