Can I Be My Own Builder For A One-Time Close Loan?
August 16, 2022
If you are interested in building a home from the ground up using a One-Time Close Construction Loan, you likely already know these loans have some important differences compared to existing construction loans and even rehabilitation loans like an FHA 203(k) rehab mortgage.
Construction loans require you to use a qualified builder, and the first question some potential borrowers ask is basically whether or not they can do their own contractor work. You will find various rules and regulations in FHA loan rulebooks, conventional lender guidelines, and VA rulebooks that address this issue; the answer on paper may vary depending on the loan program.
But among lenders, it’s typical for the borrower NOT to be permitted to act as their own contractor. Part of this may be due to risk management; building a home is a very big job and there are completion guidelines that must be followed.
A borrower does not have the luxury of being able to take all the time they want to finish the job, and lenders are typically inclined to require a licensed third party to do the work.
You cannot be your own builder for a One-Time Close loan, but you do have the ability to approve the plans for the home, and you are free to choose from a variety of materials your home can be built with. Some may opt for upscale kitchens and bathrooms, while others may prefer to build with midrange or even budget versions of those features.
So while the actual labor must be done by others, the choices are yours. And what’s more, some contractors may supply you with a list of details for the construction phase of the loan, which can be a major help when it’s time to apply for the loan.
Why?
Because when you apply for the loan your lender will need information from that document, including the overall timeline of the project, floor plans, and at some point, your loan officer will need the names of all contractors, subcontractors, suppliers, and other details that are important for the loan.
When you are gathering or reviewing these details, remember that you’ll need a timeline for the project that anticipates delays or problems. It’s not a good idea to put your construction phase on an unrealistic timeline for completion. There are always issues or delays and you’ll want to add in extra time AND money for contingencies.
That is one reason why buyers are encouraged to start an emergency fund for the construction phase. It’s also a reason why buyers should decide early in the planning stages what kind of construction loan they want to apply for; conventional, VA, FHA, etc.
Why?
Because an FHA construction loan lenders offering One-Time Close loans may only require 3.5% down, and a VA construction loan has a zero-down mortgage option. But a conventional single-close construction loan could require as much as 20% down. If you have to make that size down payment, you may need some extra time to save up your emergency fund.
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 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.
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 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.
Construction loans require you to use a qualified builder, and the first question some potential borrowers ask is basically whether or not they can do their own contractor work. You will find various rules and regulations in FHA loan rulebooks, conventional lender guidelines, and VA rulebooks that address this issue; the answer on paper may vary depending on the loan program.
But among lenders, it’s typical for the borrower NOT to be permitted to act as their own contractor. Part of this may be due to risk management; building a home is a very big job and there are completion guidelines that must be followed.
A borrower does not have the luxury of being able to take all the time they want to finish the job, and lenders are typically inclined to require a licensed third party to do the work.
You cannot be your own builder for a One-Time Close loan, but you do have the ability to approve the plans for the home, and you are free to choose from a variety of materials your home can be built with. Some may opt for upscale kitchens and bathrooms, while others may prefer to build with midrange or even budget versions of those features.
So while the actual labor must be done by others, the choices are yours. And what’s more, some contractors may supply you with a list of details for the construction phase of the loan, which can be a major help when it’s time to apply for the loan.
Why?
Because when you apply for the loan your lender will need information from that document, including the overall timeline of the project, floor plans, and at some point, your loan officer will need the names of all contractors, subcontractors, suppliers, and other details that are important for the loan.
When you are gathering or reviewing these details, remember that you’ll need a timeline for the project that anticipates delays or problems. It’s not a good idea to put your construction phase on an unrealistic timeline for completion. There are always issues or delays and you’ll want to add in extra time AND money for contingencies.
That is one reason why buyers are encouraged to start an emergency fund for the construction phase. It’s also a reason why buyers should decide early in the planning stages what kind of construction loan they want to apply for; conventional, VA, FHA, etc.
Why?
Because an FHA construction loan lenders offering One-Time Close loans may only require 3.5% down, and a VA construction loan has a zero-down mortgage option. But a conventional single-close construction loan could require as much as 20% down. If you have to make that size down payment, you may need some extra time to save up your emergency fund.
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 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.
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 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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