Issues to Consider for First Time Borrowers Building A Dream Home
February 27, 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.
One-Time Close (OTC) construction loans offer the borrower the ability to combine construction financing with your mortgage loan. This streamlines the process and making it easier to apply for. However, this convenience comes with the responsibility of being ready for a more complex financial journey.
Unlike buying an existing home where you primarily need a down payment and closing costs, building involves ongoing expenses and potential surprises. What should you be thinking about as a first-time home buyer interested in building a home from the ground up?
Start A Year Early
The earlier you start, the better. Ideally, begin planning at least a year before you want to break ground. This gives you time to build your savings, improve your credit, and research thoroughly.
Credit Scores Count
Lenders will scrutinize your credit history. Do you have a score of 620 or higher? Higher FICO scorse can unlock better interest rates and terms. Check your credit report for errors and report any you find. Pay down existing debt. Avoid new credit applications. All these things can help improve your score.
Down Payment
Your OTC down payment varies depending on the loan and the loan program. FHA loans include a down payment as low as 3.5% for those who financially qualify. VA and USDA loans may offer 100% financing for eligible borrowers.
Closing Costs
Expect to pay closing costs, typically 2-5% of the loan amount. These cover expenses like appraisal fees, title insurance, and loan origination fees.
Cash Reserves
During construction, You'll pay for inspections throughout the building process to ensure everything meets code and lender requirements. Your builder will also request funds as they complete stages of construction, known as draw requests.
And perhaps most importantly, be prepared for unexpected costs. Construction rarely goes exactly as planned, and you might encounter cost overruns due to material price increases, unexpected site conditions, or changes in your plans.
Contingency Fund
A contingency fund is essential when building a home. Aim for at least 10% of your total construction budget. This fund is your safety net. It helps you manage unexpected cost overruns without stopping the project or putting undue strain on your finances.
Debt-to-Income Ratio (DTI)
DTI is your monthly debt when compared to gross monthly income. Paying more on your current debt before applying for a loan may help your DTI. It may also increase your borrowing potential.
Construction Budget
This includes everything from land acquisition and site preparation to materials, labor, and permits. Don't forget to factor in landscaping and those final touches that make a house a home.
Ongoing Expenses
Remember that life doesn't stop during construction. You'll still have ongoing living expenses to cover. If you're renting, factor in your rent payments. If you're living in your current home while building, consider potential costs like commuting to the new construction site.
Financial Documentation
Gather recent pay stubs, tax returns, bank statements, and investment account information. Provide documentation for large deposits or unusual transactions to avoid delays.
Builder's Finances
Your builder's financial stability is just as important as their local reputation. Does your builder have the ability to finish your home? This protects your investment and provides peace of mind throughout the construction process.
Timeline for Preparation
As mentioned earlier, starting your financial preparation a year in advance is ideal. This allows ample time to improve your credit score if needed, save diligently for your down payment and cash reserves, research lenders, loan programs, and builders, and reduce existing debt to improve your borrowing potential.
Regular Check-Ins
Even with meticulous planning, financial situations can change. Regularly review your budget, track expenses, and monitor your credit.
Unlike buying an existing home where you primarily need a down payment and closing costs, building involves ongoing expenses and potential surprises. What should you be thinking about as a first-time home buyer interested in building a home from the ground up?
Start A Year Early
The earlier you start, the better. Ideally, begin planning at least a year before you want to break ground. This gives you time to build your savings, improve your credit, and research thoroughly.
Credit Scores Count
Lenders will scrutinize your credit history. Do you have a score of 620 or higher? Higher FICO scorse can unlock better interest rates and terms. Check your credit report for errors and report any you find. Pay down existing debt. Avoid new credit applications. All these things can help improve your score.
Down Payment
Your OTC down payment varies depending on the loan and the loan program. FHA loans include a down payment as low as 3.5% for those who financially qualify. VA and USDA loans may offer 100% financing for eligible borrowers.
Closing Costs
Expect to pay closing costs, typically 2-5% of the loan amount. These cover expenses like appraisal fees, title insurance, and loan origination fees.
Cash Reserves
During construction, You'll pay for inspections throughout the building process to ensure everything meets code and lender requirements. Your builder will also request funds as they complete stages of construction, known as draw requests.
And perhaps most importantly, be prepared for unexpected costs. Construction rarely goes exactly as planned, and you might encounter cost overruns due to material price increases, unexpected site conditions, or changes in your plans.
Contingency Fund
A contingency fund is essential when building a home. Aim for at least 10% of your total construction budget. This fund is your safety net. It helps you manage unexpected cost overruns without stopping the project or putting undue strain on your finances.
Debt-to-Income Ratio (DTI)
DTI is your monthly debt when compared to gross monthly income. Paying more on your current debt before applying for a loan may help your DTI. It may also increase your borrowing potential.
Construction Budget
This includes everything from land acquisition and site preparation to materials, labor, and permits. Don't forget to factor in landscaping and those final touches that make a house a home.
Ongoing Expenses
Remember that life doesn't stop during construction. You'll still have ongoing living expenses to cover. If you're renting, factor in your rent payments. If you're living in your current home while building, consider potential costs like commuting to the new construction site.
Financial Documentation
Gather recent pay stubs, tax returns, bank statements, and investment account information. Provide documentation for large deposits or unusual transactions to avoid delays.
Builder's Finances
Your builder's financial stability is just as important as their local reputation. Does your builder have the ability to finish your home? This protects your investment and provides peace of mind throughout the construction process.
Timeline for Preparation
As mentioned earlier, starting your financial preparation a year in advance is ideal. This allows ample time to improve your credit score if needed, save diligently for your down payment and cash reserves, research lenders, loan programs, and builders, and reduce existing debt to improve your borrowing potential.
Regular Check-Ins
Even with meticulous planning, financial situations can change. Regularly review your budget, track expenses, and monitor your credit.
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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