One-Time Close Loans | FHA and VA Construction Loans
VA and FHA One-Time Close Construction Loans

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Construction Loan Terms To Remember Before You Start

Construction Loan Terms To Remember Before You Start
Many industry terms are unfamiliar to first-time home buyers, especially those looking for a One-Time Close construction loan. 

Knowing some of these terms in advance can help you make better decisions in the planning stages of your single-close loan. We examine some important construction loan terms below to help you better navigate the process.


An appraisal is a lender tool for ensuring a home meets minimum standards and establishes its fair market value. When applying for a construction loan, any appraisal is meant to reflect the property value once the construction project is complete.

Contingency Reserve

A contingency reserve is typically used in construction loans to protect against cost overruns. Borrowers should plan on saving money for the contingency reserve just in case. It’s a bad idea to go into a building project without one.


The men and women who perform the services needed to build your dream home are often referred to as contractors. This can include builders, electricians, plumbers, and many other service providers.

Energy-Efficient Mortgage

This is an add-on to an existing construction loan guaranteed by the FHA or VA, allowing extra loan funds for approved upgrades that increase the home’s energy efficiency. It is not a separate FHA construction loan or a separate VA single-close mortgage loan program.


An account in which loan funds are deposited into to make them available for construction loan “draws” needed to pay contractors. 

Home loan funds may not pass through the borrower’s accounts according to mortgage loan guidelines, hence the need for a separate, controlled account where the money resides while the project is ongoing. There are other uses for escrow but this is the most relevant use for construction loans.

Scope Of Work

This is essentially a budget, but the scope of work implies a certain amount of constraint. Your builders and other contractors are not meant to exceed the scope of work and if issues arise that require consideration of additional labor, having those contingencies covered by the scope of work where applicable and permitted can help. 

The scope of work details typically include the costs associated with the work; it’s not just about deadlines and deliverables.

Title Search

A title search ensures that the land you buy in conjunction with a One-Time Close loan has no prior liens or other issues that might interfere with the construction loan. 

All borrowers who purchase land with a One-Time Close mortgage should have a title search run for their protection.

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. 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.

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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Construction Loan Choices

When 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.

Expect The Unexpected With Your One-Time Close Loan

If you want to build a home from the ground up on land you own or buy in conjunction with the loan, you need a One-Time Close construction loan. Available as a VA or FHA option, the single-close construction loan makes it possible to build a home with plans and materials you approve.

Construction Loan Terms To Remember Before You Start

There are many industry terms unfamiliar to first-time home buyers, especially those looking for a One-Time Close construction loan. Knowing some of these terms in advance can help you make better decisions in the planning stages of your single-close loan. We examine some important construction loan terms below to help you better navigate the process.

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