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Construction Loan Down Payments


Construction Loan Down Payments
One-Time Close construction loans have unique requirements, Lenders who offer these loans often have higher credit score requirements and there are some unique issues for those who choose to build rather than buy existing construction.

There are some unique down payment issues you’ll experience when comparing single-close construction loan options. What do you need to know about the down payment aspect of these home loans?

Down Payment Sources

For home loans in general, the source of your down payment money will be crucial. Lenders typically require you to provide information about the sources of your down payment. Does the money come from the cash you have saved over time? 

The lender will need to see documentation of that. Did it come from cashed-in investments like stocks or bonds? The same is true no matter what the source of the funds.

What you should know about the down payment rules for your One-Time Close construction loan is that your down payment cannot come from a credit card cash advance, from pink slip loans, payday loans, etc. 

Home loan down payment rules typically include a prohibition against down payment money coming from any party to the loan who could financially benefit from the transaction. But for single-close construction loans, this should typically not be an issue for one important reason.

Down Payment Assistance

Many lenders simply won’t agree to a construction loan if the borrower requires down payment assistance in order to afford the loan. Construction loans in general are more expensive than other types of mortgages, and part of the lender’s job is to ensure the applicant is able to realistically afford the loan.

Down payment assistance is not an option for construction loans, but choosing the right loan could help. If you are worried about your ability to afford the down payment on a conventional construction loan for a primary residence, consider a government-backed One-Time Close loan such as an FHA or VA option. 

FHA construction loans have the same low down payment requirement as its other loans for purchasing condo units, suburban homes, manufactured housing, etc. 

VA construction loans have a zero down payment option but these are not offered to the general public. However, if you have qualifying military service you could be eligible to apply.

The down payment issue is a crucial one; there’s nothing wrong with delaying your construction loan until you feel you have enough saved up for your down payment requirement. And it’s also good to remember that the more you put down, the more you will save over the lifetime of the mortgage--single-close construction loans or otherwise.

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 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 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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