What is the FHA One-Time Close program? Who is it meant for? These are questions with important answers for potential FHA borrowers who are interested in applying for an FHA mortgage to have property built for them instead of buying an existing construction property.
One-Time close mortgages are construction loans that differ from standard construction loans in that there is a single closing date for the loan rather than the traditional two closing dates. The borrower saves money on a one-time close loan thanks to the single loan for construction costs, land purchase, and the typical expenses associated with a home loan.
These savings work in ways you might not expect. One advantage of this type of construction loan is that the lender and borrower arrive at a mortgage loan interest rate lock commitment for the mortgage earlier than they might with the old "two loan system" for FHA construction loans. That protects a borrower from possible higher interest rates later down the line, saving money over the lifetime of the mortgage with a fixed-interest rate home loan.
One-Time Close loans feature a closing date that occurs before construction begins on the home. Funds are disbursed multiple times during the course of the construction, and the construction project is monitored to insure progress. Borrowers should know that One-Time Close FHA loans require additional waiting time depending on the nature and duration of construction, inspections, etc.
FHA One-Time Close mortgage loans are more complex than typical FHA loans or FHA refinance loans for a suburban home because of the nature of the mortgage.
Under the old "two-loan" system for building and buying a new property, the borrower had to qualify for a loan twice. This is not the case with an FHA One-Time Close loan, where the borrower qualifies for one loan.
That loan has two phases-a construction phase, and a permanent phase. The construction portion of the FHA loan allows money to be paid for the construction of the property without the lender’s intervention. During the construction phase, the borrower is not required to make any mortgage payments. Once the permanent phase of the loan begins, the borrower will begin to make her mortgage payments the same as with any typical home loan.
Our site has done some extensive research on this product and have compiled a list of licensed FHA One-Time Close lenders for most states. These are qualified mortgage loan officers who work for lenders that know the product well. Each company has supplied me the guidelines for their product. If you are interested in being contacted by one licensed lender in your area, please respond to the below questions to save time.
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- Send your first and last name, e-mail address, and contact telephone number.
- Tell us the city and state of the proposed property.
- Tell us your credit score and/or the Co-borrower’s credit score, if known. 620 is the Minimum qualifying credit score for this product.
- Are you or your spouse (Co-borrower) eligible Veterans?
- If either of you are eligible Veteran’s, the down payment is $0 up to the maximum VA lending limit for your county. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.