One-Time Close Loans | FHA and VA Construction Loans
VA and FHA One-Time Close Construction Loans

Construction on your new home can begin once the One-Time Close loan goes to closing. Payments are made to the builder on a work-completed basis.

- Build a Home on Your Own Lot -
VA Loan - One-Time Close Construction Loan
FHA Loan - One-Time Close Construction Loan

From Construction Phase to Move-In Day

You've closed on your One-Time Close Loan, and it's time for construction on your new home to begin! Your lender will start to disburse "draws" to your contractor over time as the building progresses.

Draw Disbursement

With a Single Close loan, payments are made to the builder on a work-completed basis. Draw requests must be submitted by the builder, along with an itemized report of the progress made on the home. An additional assessment comes from an independent, third-party inspection service that determines the percentage of work completed. Once these reports are received by the lender and the draw amount determined, the disbursements are made to your builder. Some lenders may flow the funds through the closing/escrow agent, while others may disburse directly to the builder.

Learn About the One-Time Close Constuction Loan
"Once you've closed on the mortgage, construction on your new home can begin. This time period can vary, but typically doesn't exceed 9 months."

It Begins With the Start-up Draw

Beaver talks about OTC home construction issuesA start-up draw might be paid to your contractor after closing is finalized. This includes the lot payoff amount, less any down payment. Your builder receives the final draw once the project is completed. Lenders may require additional documentation before making this last payment, such as a final appraisal inspection, an endorsement from the Title Company, and proof of the homeowner's insurance policy.

Construction Period

Whether it's FHA or VA, most lenders don't want to see the construction period on your new home exceed 9 months. Every home is different, which means that this timeframe can vary according to the location and type of home. Our lenders have provided average construction periods for the different, one-unit homes financed via One-Time Close loans:

  • Site-Built homes -- 280 days average
  • Modular homes -- 240 days average
  • Manufactured homes -- 200 days average

Amortization and Move-In

During the interim construction period—however long it may be—you are typically not required to make payments on the loan or pay the construction interest. Your builder is responsible for the interest during the construction period, which is an incentive to finish building as quickly as possible. Payments are normally due once the project is complete, all required documents have been provided by your builder to the lender, and the construction portion of the loan converts to the permanent portion of the loan. Your permanent mortgage begins amortization no later than the first of the month following 60 days from the issuance of the certificate of occupancy by the local municipality or final compliance inspection, whichever comes later. No re-qualifying, no increase to your interest rate, and no additional closing costs!

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Articles, Updates, and Guidelines
OTC articles
What To Know About Construction Loans Before You Apply

There are a lot of myths about home loans in general and a few pervasive ones about construction loans worth dispelling. What do you need to know when you commit to building your own home from the ground up?

Construction Loan Approval Rules For Employment And Income

If you want to build your own home, it’s good to know that doing so means taking some extra time to work on your credit and employment history before applying. Construction loans are harder to qualify for with income and employment for some, what do you need to know before you start the process? We examine some key points.

Construction Loan Interest Rates For The Rest Of 2024

Many financial pundits and mortgage blogs discuss the current state of construction loan interest rates. Some of these sites make predictions, including noting that One-Time Close construction loan interest rates will likely stay around the mid-6 % range for the rest of 2024. Those hoping to build a home from the ground up this year with interest rates closer to pre-pandemic levels are likely to be disappointed. What should borrowers expect going forward? Is it smart to delay a construction loan until the Fed cuts rates again?


-- Find More Articles in the OTC Library --

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