What You Need To Know About Cash To Close

When you build a home with a One-Time Close mortgage, a down payment and closing cost payments are required, the same as any other mortgage. When it comes to these expenses, some borrowers might assume you just hand the lender a check and call it a day, but there are rules to know about closing costs and down payments on your single-close construction loan that make a big difference when it’s time to plan and save for the loan.

Estimating Your Closing Costs

In the planning stages of a single-close construction loan, you will want to anticipate your closing costs as well as the down payment and plan accordingly. A down payment on a construction mortgage may be anywhere from 3.5% to 20% depending on the type of loan, whether or not you want to avoid paying mortgage insurance, etc.

Closing costs will include items such as origination fees, home inspection fees, home appraisal fees, title search, credit agency fees, escrow fees, and more. Your closing costs will vary based on any number of variables but typically you should expect to budget between 2% and 5% of the loan amount for closing costs.

Buying Land?

Not all construction loan transactions involve the purchase of a plot of land to build upon, but if yours does, you’ll need to add in the cost of the land. If you have the ability to buy the land outright up front instead, this may be a smart move. If you already own your land, be sure to ask the lender about using land equity as part of the down payment.

The Age And Source Of Your Down Payment

All lenders are required to make sure you can realistically afford the loan you seek. Part of this involves scrutinizing your down payment funds. Many know this already when they enter into the application phase of their construction loan. 

What they may not know is that thinking like a lender about these things can help. A good example? A borrower who can’t save their own construction loan down payment funds may be one a lender decides to take a pass on. 

Construction loans are more expensive than existing construction mortgages and more complex. They aren’t right for all borrowers--those who struggle to come up with a down payment may not be right for this type of loan. 

For those who do come to the table with down payment funds ready to go, it’s smart to “season” those funds by hanging onto the money for at least 60 days before transferring it to the lender. If you can’t season your loan funds, the lender may ask you to provide a gift letter or similar document showing in writing where the money comes from. The lender may ask for this regardless, and it helps to anticipate the ask.

Paying Your Closing Costs And Down Payment

Ask each lender you compare about their procedures for accepting payment for closing costs and your down payment. The reason this is so important? The rise of scams using wire transfers to swindle people has made some lenders specify the types of payment methods they will and will not accept.

You may have to give the lender a cashier’s check or a certified check for the down payment and closing cost funds; under no circumstances should you agree to a wire transfer request sent to you by email, text, or via social media.

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.