What To Expect When Building Your Home
September 27, 2023
If you have only purchased existing construction before or are a newcomer to buying a home in general, you might not know about some of the rules unique to construction loans. How does building differ from buying? There are a few important differences.
Rule Number One For One-Time Close Construction Loans
The first rule to understand is that lender requirements for single-close construction loans may differ greatly from the on-paper rules of some government-backed versions of the loan.
For example, an FHA loan may permit you to buy a multi-unit home, but many participating lenders won’t agree to lend to build a home larger than a single unit.
Others may require higher FICO scores to qualify for a construction loan versus an existing construction purchase.
What you find on paper in the VA loan, FHA mortgage, or USDA home loan rulebooks may be supplemented by lender standards, which is permitted as long as the loan is still “reasonable” and similar to other mortgages of its type.
Construction Loans Are More Complex Than Purchase Loans
The journey toward homeownership when you commit to building rather than buying existing construction means owning land to build on or buying land in conjunction with the loan. If you already own the land, you’re a step ahead.
If you must buy land, you’ll need to ensure it doesn’t have liens or other issues that can affect your use of the property. A title search on the land you want to buy is crucial.
Don’t Expect To Build Your Own Home With Your Own Crew
Home loan rules found in the VA Lender’s Handbook or the FHA Single Family Lender’s Guide may permit a borrower with the proper experience and qualifications to act as their own contractor. But your lender is likely not to allow it.
Don’t Expect Help With Your Down Payment
Your lender will likely require you to come up with your own down payment funds as a condition of loan approval on a construction loan.
Do Expect Delays, Cost Overruns, Or Related Issues
The borrower who does not save extra money for contingencies or who does not borrow enough to cover contingencies may find themselves in need of extra cash should the construction project run into delays.
No borrower should expect the construction project to run perfectly. Weather, illness, supply chain issues, and delays in getting the right permits can slow you down. If you cross your fingers and hope for the best, you are likely to be disappointed.
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 who 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).
In addition, 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.
Rule Number One For One-Time Close Construction Loans
The first rule to understand is that lender requirements for single-close construction loans may differ greatly from the on-paper rules of some government-backed versions of the loan.
For example, an FHA loan may permit you to buy a multi-unit home, but many participating lenders won’t agree to lend to build a home larger than a single unit.
Others may require higher FICO scores to qualify for a construction loan versus an existing construction purchase.
What you find on paper in the VA loan, FHA mortgage, or USDA home loan rulebooks may be supplemented by lender standards, which is permitted as long as the loan is still “reasonable” and similar to other mortgages of its type.
Construction Loans Are More Complex Than Purchase Loans
The journey toward homeownership when you commit to building rather than buying existing construction means owning land to build on or buying land in conjunction with the loan. If you already own the land, you’re a step ahead.
If you must buy land, you’ll need to ensure it doesn’t have liens or other issues that can affect your use of the property. A title search on the land you want to buy is crucial.
Don’t Expect To Build Your Own Home With Your Own Crew
Home loan rules found in the VA Lender’s Handbook or the FHA Single Family Lender’s Guide may permit a borrower with the proper experience and qualifications to act as their own contractor. But your lender is likely not to allow it.
Don’t Expect Help With Your Down Payment
Your lender will likely require you to come up with your own down payment funds as a condition of loan approval on a construction loan.
Do Expect Delays, Cost Overruns, Or Related Issues
The borrower who does not save extra money for contingencies or who does not borrow enough to cover contingencies may find themselves in need of extra cash should the construction project run into delays.
No borrower should expect the construction project to run perfectly. Weather, illness, supply chain issues, and delays in getting the right permits can slow you down. If you cross your fingers and hope for the best, you are likely to be disappointed.
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 who 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).
In addition, 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.
See Your Credit Scores From All 3 Bureaus
Do you know what's on your credit report?
Learn what your score means.
Articles, Updates, and Guidelines
FHA Single Close Construction Loans
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.
The VA Construction Loan Timeline
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.
Construction Loan Choices
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.
