First-Time Home Buyers: Build Your New Home With A One-Time Close Construction Loan

Mortgage and Lending with

Buying a home can be challenging for some first-time borrowers. Many newcomers to the mortgage market don’t know all their options open and in that situation it is easy to make choices that are less than fully-informed.

One-Time Close construction loans are open to any financially qualified applicant and that includes FHA borrowers who have never purchased a home before but have good FICO scores and repayment history that has no late or missed payments in the last 12 months or better.

One-Time Close loans are offered as FHA, VA, and even USDA mortgages. The FHA version is NOT need-based and features no income caps, unlike the USDA version.

VA construction loans are intended only for qualifying military members, veterans, and certain surviving spouses of military members.

For the average borrower who needs a low down payment requirement and the flexibility of a government-backed mortgage, the FHA One-Time Close construction loan is an option worth exploring.

FHA One-Time Close loans (FHA OTC) carry the same FHA minimum requirements as any other type of home loan for purchase.

The participating FHA lender will tell you that these construction loans offer the same basic down payment requirements (3.5% minimum for those with qualifying FICO scores), and the same rules for mortgage insurance, appraisals, and interest rates also apply. 

The good news about FHA construction loans? First time buyers do not have to come up with a bigger down payment just because they have never purchased a home before.

However, in all cases borrowers who do not qualify for the most competitive rates and terms (with FICO scores and other financial qualifications) may be required to make a higher down payment on that basis.

Whether your lender allows you to apply for a construction loan in such cases may be a factor–ask about the credit requirements for a construction loan compared to buying an existing home.

You should definitely give yourself more time to prepare your credit and your finances ahead of a construction loan application. Why?

Because not all housing markets operate the same–some states have crowded, busy markets and permits for construction and other requirements may take much longer.

More time to save can also be helpful–FHA construction loans require more investment than buying an existing construction property because you’ll need a floor plan, laborers to complete the home, inspections must be paid for, permits, etc.

The extra time you take to save up for these costs and others will be well worth the effort when your new home is complete.

Learn More About FHA, VA and USDA One-Time Construction Close to Permanent / Single-Close Construction Loans

One-Time Close Loans are available with VA, FHA and USDA Mortgages.  We have relationships with several large Mortgage Banking firms who specialize in these loans which also go by the following names: 1 X Close, Single-Close Loan or OTC Loan.

Our extensive research on these programs and their guidelines allow us to educate potential home buyers who want to explore purchasing a newly constructed home versus purchasing a resale home while utilizing the same down payments for each product type.

We are constantly updated on these programs and have extensive knowledge on VA (Department of Veterans Affairs), FHA (Federal Housing Administration) and USDA (United States Department of Agriculture) One-Time Close Construction programs.

We speak directly to the licensed lenders that originate these residential loan types in most states. They are qualified mortgage loan officers who work for lenders that know the product well. Each company has supplied us with 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. All information is treated confidentially.

Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes).  Home types include:  Site-Built, Modular or Manufactured Homes.

In addition, the following are “NOT” allowed under these programs:
Kit Homes – Steel Framing Kits, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar or Wind Powered Homes.

Your response to authorizes us to share your personal information with a licensed mortgage lender that is familiar with your area to contact you.

  1. Send your first and last name, e-mail address, and good contact number.
  2. Tell us the city and state of the proposed property.
  3. 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.
  4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, the down payment is $0 up to the maximum amount that the debt ratio will allow – there are no maximum loan amounts as per the Department of VA. Most lenders will go up to $750,000. If not, the FHA down payment is 3.5% up to the maximum FHA Lending Limits for your county and the USDA down payment is $0 and based on maximum income.

Comments (3)

Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

Jun 30, 2020 01:10 AM
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Bruce. A one time close can avoid many problems. Enjoy your day!

Jun 30, 2020 04:28 AM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

I am successful nearly 50% of the convincing Buyers to use a Construction to Permanent Loan . It saves them several thousand in PA  

Jun 30, 2020 04:53 AM