More Answers to Common Construction Loan Questions
As we noted the first time around, single-close mortgages are better for some borrowers than others. Unfortunately, some don’t realize this until they’ve submitted a loan application, only to be turned down by the lender.
Why Must I Pay More Up Front?
Typically speaking, according to some sources, you want to reserve 20% of the price of the project in cash.
This is because construction projects can experience cost overruns. If you run out of money before the project is finished, you may be forced to scramble for additional cash to get you closer to project completion.
That aside, larger down payments are typical for construction loans regardless of your cash reserves.
Why Didn’t I Qualify For A Construction Loan?
The most basic answer in some cases is that the borrower didn’t qualify with the higher FICO score guidelines many lenders use for construction loans.
If your FICO scores don’t qualify for the lowest FHA loan down payment (3.5%), you likely won’t be approved for the risker and more expensive construction loan option.
Why Did My Project Go Over Budget?
There are many reasons why a construction project can exceed the budget you set for it when the loan was approved. Rising costs for raw materials is one reason. Delays due to weather or other factors may be another.
“Cost creep” is an industry term for the rising expenses related to building a home, and the causes may also include circumstances beyond your control, miscommunications, or other issues.
Agreeing to a construction loan without a contingency budget for such issues is a mistake. Don’t assume the project will come in on time and under budget for best results.
Want More Information About One-Time Close Loans?
We have extensively researched the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) One-Time Close Construction loan programs.
We have spoken directly to licensed lenders that originate these residential loan types in most states, and each company has supplied us with the guidelines for their products.
We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service.
If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
OneTimeClose.com provides information and connects consumers to qualified One-Time Close lenders to raise awareness about this loan product and to help consumers receive higher-quality service.
We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA and VA One-Time Close Construction Program only allow for single-family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes).
The following homes/building styles are not allowed under these programs: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
Contact Us: Send Us Your Request – Spam Safe
Please send your email request to [email protected] which authorizes OneTimeClose.com to share your personal information with one mortgage lender licensed in your area to contact you.
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair –
(620-639), or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
4. Are you or your spouse (Co-borrower) eligible veterans?
If either of you is an eligible veteran, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines.
Most VA lenders will go up to $1,500,000 and review higher loan amounts on a case-by-case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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July 26, 2024The Federal Housing Administration (FHA) offers qualifying borrowers the option to build a home from the ground up using a Single Close FHA Construction Loan. This program, also known as a One-Time Close construction mortgage, allows borrowers to finance the construction of a new home and convert it into a permanent mortgage with just one closing, streamlining the often complex process of building a house.
July 19, 2024VA One-Time Close construction loans help qualifying veterans build homes they will own and occupy once the construction phase is complete. One-time close loans, or construction-to-permanent loans, combine construction and permanent financing into a single closing procedure. VA One-Time Close mortgages have no VA-required down payment or mortgage insurance, making them attractive options for qualifying borrowers.
July 12, 2024When planning a construction loan, you have many options. For example, do you want to buy land with a loan to build the house? Or do you already own a parcel suitable for the construction project? There are many other choices to make with home loans, but some don’t necessarily apply to construction mortgages.
