One-Time Close Construction Loan Basics
January 16, 2025
FHA, VA, and USDA: One-Time Close Loans
Want More Information About One-Time Close Loans?
We have done extensive research on 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 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 allows 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, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.
All known FHA/VA One-Time Close Lenders known to our company will not allow a borrower to act as their own contractor, whatsoever. There cannot be self-builds, relative builds, or employer builds.
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. No SSN required • No credit check • 100% free to get started
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 are eligible veterans, 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 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.
Have you Ever dreamed of building your own home customized to your tastes and needs? Navigating the world of construction loans can be daunting at first.
Some people find themselves juggling a short-term loan for the building phase and scrambling to secure a separate mortgage once the house is complete. But there's a more straightforward way: the single-close construction loan.
One Loan, Two Purposes
Think of a single-close construction loan, sometimes called a One-Time Close (OTC) mortgage, as a streamlined approach to financing your new home build. Instead of two separate loans, you get one comprehensive package covering the construction process and your long-term mortgage. This means you only have to go through the application, approval, and closing process once.
Initially, the loan functions as a construction loan, providing funds to your builder in stages as they complete different project phases. Once the house is finished and you're ready to move in, this same loan seamlessly converts into a traditional mortgage with regular monthly payments.
Why Choose a One-Time Close Construction Loan?
There are several compelling reasons to consider this type of loan. First, it simplifies the entire financing process. You won't have to deal with two different lenders, two sets of paperwork, and two closing dates.
Second, you'll save money on closing costs. Since you're only closing once, you avoid paying these fees twice, which can free up a significant amount of cash for other expenses related to your new home.
Another advantage is the convenience of managing just one loan. You'll have a single point of contact for all your questions and concerns, making communication and administration much easier.
Finally, a single-close loan may speed up the building process. With the financing streamlined, there may be fewer delays, allowing you to move into your new home sooner.
How Does it Work?
Before you apply for a single-close construction loan, it's essential to have a clear plan and budget in place. This includes the cost of land, construction materials, labor, permits, and any other anticipated expenses.
Next, find a lender that offers this type of loan. Not all lenders do, so it's important to shop around and find one with experience in single-close construction financing.
Be prepared to provide the lender with detailed information about your finances, the construction project, and your chosen builder. The lender will assess your creditworthiness and the feasibility of your project.
The lender may require an appraisal of the property as raw land and a completed home based on your plans. They may also conduct inspections throughout construction to ensure the work progresses as planned and meets quality standards.
Once you're approved, you'll sign the loan documents and pay the closing costs. The lender will then begin disbursing funds to your builder in stages as construction progresses.
You'll typically make interest-only payments on the outstanding loan balance during construction. This helps keep your costs lower while your home is being built.
When the house is finished, and the final inspection is approved, the loan automatically converts to a permanent mortgage. You'll then start making regular principal and interest payments, just like a traditional mortgage.
Things to Keep in Mind
Choosing a reputable and experienced builder is crucial. Your lender may have specific requirements for builder qualifications to ensure the quality and timely completion of your project.
It's also wise to have a contingency fund to cover any unexpected costs that may arise during construction. Building projects rarely go exactly as planned, so having a financial cushion can help you navigate surprises without derailing your budget.
Ensure you understand the draw schedule, which outlines when and how funds are released to your builder. This schedule should align with your builder's needs to ensure timely payments for materials and labor.
Open and consistent communication with both your lender and builder is essential throughout the process. This helps prevent misunderstandings, address concerns promptly, and keep the project on track.
Some people find themselves juggling a short-term loan for the building phase and scrambling to secure a separate mortgage once the house is complete. But there's a more straightforward way: the single-close construction loan.
One Loan, Two Purposes
Think of a single-close construction loan, sometimes called a One-Time Close (OTC) mortgage, as a streamlined approach to financing your new home build. Instead of two separate loans, you get one comprehensive package covering the construction process and your long-term mortgage. This means you only have to go through the application, approval, and closing process once.
Initially, the loan functions as a construction loan, providing funds to your builder in stages as they complete different project phases. Once the house is finished and you're ready to move in, this same loan seamlessly converts into a traditional mortgage with regular monthly payments.
Why Choose a One-Time Close Construction Loan?
There are several compelling reasons to consider this type of loan. First, it simplifies the entire financing process. You won't have to deal with two different lenders, two sets of paperwork, and two closing dates.
Second, you'll save money on closing costs. Since you're only closing once, you avoid paying these fees twice, which can free up a significant amount of cash for other expenses related to your new home.
Another advantage is the convenience of managing just one loan. You'll have a single point of contact for all your questions and concerns, making communication and administration much easier.
Finally, a single-close loan may speed up the building process. With the financing streamlined, there may be fewer delays, allowing you to move into your new home sooner.
How Does it Work?
Before you apply for a single-close construction loan, it's essential to have a clear plan and budget in place. This includes the cost of land, construction materials, labor, permits, and any other anticipated expenses.
Next, find a lender that offers this type of loan. Not all lenders do, so it's important to shop around and find one with experience in single-close construction financing.
Be prepared to provide the lender with detailed information about your finances, the construction project, and your chosen builder. The lender will assess your creditworthiness and the feasibility of your project.
The lender may require an appraisal of the property as raw land and a completed home based on your plans. They may also conduct inspections throughout construction to ensure the work progresses as planned and meets quality standards.
Once you're approved, you'll sign the loan documents and pay the closing costs. The lender will then begin disbursing funds to your builder in stages as construction progresses.
You'll typically make interest-only payments on the outstanding loan balance during construction. This helps keep your costs lower while your home is being built.
When the house is finished, and the final inspection is approved, the loan automatically converts to a permanent mortgage. You'll then start making regular principal and interest payments, just like a traditional mortgage.
Things to Keep in Mind
Choosing a reputable and experienced builder is crucial. Your lender may have specific requirements for builder qualifications to ensure the quality and timely completion of your project.
It's also wise to have a contingency fund to cover any unexpected costs that may arise during construction. Building projects rarely go exactly as planned, so having a financial cushion can help you navigate surprises without derailing your budget.
Ensure you understand the draw schedule, which outlines when and how funds are released to your builder. This schedule should align with your builder's needs to ensure timely payments for materials and labor.
Open and consistent communication with both your lender and builder is essential throughout the process. This helps prevent misunderstandings, address concerns promptly, and keep the project on track.
FHA, VA, and USDA: One-Time Close LoansWant More Information About One-Time Close Loans?We have done extensive research on 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 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 allows 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, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.
All known FHA/VA One-Time Close Lenders known to our company will not allow a borrower to act as their own contractor, whatsoever. There cannot be self-builds, relative builds, or employer builds.
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. No SSN required • No credit check • 100% free to get started
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 are eligible veterans, 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 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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