Build a Home on Your Own Lot FHA Construction Loans for Building Your Dream Home

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If you are one of the many potential homeowners building your new home from scratch, you might be considering a Construction to Permanent Loan, also known as the One-Time Close loan, which allows you to finance the lot purchase, construction, and permanent mortgage with a single loan and closing. This type of loan enables you to construct your home on the land of your choosing, or on land you own outright.

The Land

If you already own a plot of land on which you intend to build a home, you are a step ahead in the process. Your land equity will cover the down payment requirement (3.5% minimum for FHA loans). You might need to purchase the lot; in which case it is important to think long term. Whether you own the lot or you are looking for the best one, it is in your benefit to consult your contractor. There are many factors that go into selecting land to build on that an experienced builder knows to look for. You may think the land is perfect for the two-story house you envision, but a seasoned builder can help you determine whether the lot is suitable to build on at all.

You may want to use the assistance of a licensed real estate agent in your area. They can locate lots for sale and take you to the property for viewing. If you choose to go this route, you will need to let the agent know that you plan on utilizing the One-Time Construction loan program in order to finance both the land and the construction.

Finding a Builder

The most important step in building a home on your own lot is selecting the contractor. A licensed general contractor has a wealth of knowledge and is going to be your best resource in selecting the land to build on, giving you floorplan options, and guiding you in making the best decisions. Involving your builder in the decision-making process sooner rather than later is bound to save you time and money, as well as avoid frustration in the process.

When searching for a contractor, the best move is to be upfront about your needs. Be clear that you will be financing with a One-Time Close Loan. Look for builders who have experience with build-on-your-lot projects and are used to working with a buyer’s needs and budgets. Seasoned contractors also have relationships with suppliers and can get you the best pricing on materials for construction.

It is often the case that borrowers who have construction skills want to build their own home. While the FHA has no restrictions on a borrower working as a contractor on their own home, it ultimately comes down to your lender’s discretion. The fact is that lenders are never onboard with taking on that risk, and so the answer is that they will not allow it to happen under any circumstances.

What to Know When Building on Your Own Lot

As you come up with the plans for your new home, you and your contractor need to be up to date on any and all building restrictions. You will need to determine geographical constraints, such as the distance the structure must be from a property line, local zoning codes or ordinances. This information can be found through public records at zoning offices or the city hall.

Keep in mind that you and your builder need to follow the One-Time Close process and requirements with your lender as well. You will need to supply the architectural plans, a list of building materials, and work on getting an appraisal report. Lenders also require a Construction Contract, that outlines the project, the cost of building, and the timeframe of completion.

There are many factors to consider when deciding to build on your own lot, and you may be daunted by the process. To help you with your first step, can put you in touch with a well-versed licensed lender in your area to get pre-qualified for this type of loan. has also compiled a list of Builders Associations across the U.S. These organizations serve as a resource for homebuyers and can assist you in hiring the best contractor to make your dream home a reality!

Want More Information About One-Time Close Loans?

One-Time Close Loans are available for FHA, VA and USDA Mortgages.  These loans also go by the following names: 1 X Close, Single-Close Loan or OTC Loan. This type of loan allows for you to finance the purchase of the land along with the construction of the home. You can also use land that you own free and clear or has an existing mortgage.

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) 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 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 to one licensed construction lender in your area, please send responses to the questions below. All information is treated confidentially. provides information and connects consumers to qualified One-Time Close lenders in an effort 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, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT act as your own general contractor (Builder) / not available in all States.

In addition, this is a partial list of the following homes/building styles that are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin or Bamboo Homes, Shipping Container Homes, Dome Homes, Bermed Earth-Sheltered Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Tiny Homes, Carriage Houses, Accessory Dwelling Units and A-Framed Homes.

Your email to authorizes to share your personal information with a mortgage construction lender licensed in your area to contact you.

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 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.

Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veteran’s, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio VA will allow – there are no maximum loan amounts as per VA guidelines.  Most lenders will go up to $1,000,000 and review higher loan amounts on a case by case basis.   If not an eligible veteran, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.

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