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VA and FHA One-Time Close Construction Loans

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Construction Loan Terms You Should Know

Construction Loan Terms You Should Know

If you want to build a home with a One-Time Close construction loan, there are some important vocabulary terms to know.

Newcomers to this process sometimes feel overwhelmed by the sheer volume of new information (including new terms and jargon) they encounter as they start the journey toward home ownership. Knowing some of these in advance can help.

Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage features a lower introductory interest rate and periodic adjustments after that introduction period expires. Borrowers sometimes ask about ARM options for One-Time Close construction loans, but you may find lenders typically offer single close loans as fixed rate mortgages.

Annual Percentage Rate

The Annual Percentage Rate, or APR, is sometimes confused with the interest rate on a mortgage. Why do you need to know the difference? The annual percentage rate measures the larger cost of the loan than just the interest rate. APR rates include the mortgage rate plus points (where applicable), broker fees, or other expenses paid to get the construction loan.

Closing Costs

Closing costs are the expenses due at closing time, including mortgage insurance and lender fees. Some construction loan closing costs may be financed into the loan depending on the lender, the costs, and other variables. Closing costs may vary depending on the housing market, and while some choose to finance them, it can increase the monthly payment amount as a result.

Down Payment 

The concept of a down payment is simple. Why do we include it here? Because of a common misconception that closing cost funds are considered part of the down payment.

Some hope that by paying a lender fee or mortgage insurance, they are whittling down the amount of the down payment, but this is not true. The down payment is an entirely separate expense from all other closing costs.


A draw is used for One-Time Close construction loans, FHA 203(k) rehab loans, and even FHA energy efficient mortgages. For construction loan projects, the \draw is defined as cash paid out by the lender for costs associated with building, remodeling, or upgrading a home. Contractors are paid by the draw based on completed labor or the need for materials.


When a lender performs a draw (see above), those funds typically are paid from an escrow account. Escrow is an agreement where “ asset or money is held by a third party on behalf of two other parties that are in the process of completing a transaction,” according to the Consumer Financial Protection Bureau.

Lenders typically require escrow for any project that requires a builder or other third parties.

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. 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 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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