FHA One-Time Close Construction Loan Lenders: How to Find the Best Financing for Your Build

If you’re looking to build a new home, the FHA One-Time Close construction loan program can provide an affordable financing option that bundles your construction loan and permanent mortgage into one But to get approved, you need to find an experienced FHA One-Time Close lender This article will cover how this unique loan works, its benefits, and tips for choosing the right lender.

What is the FHA One-Time Close Construction Loan Program?

The FHA One-Time Close loan is a mortgage product insured by the Federal Housing Administration that lets borrowers finance the construction of a new home as well as the purchase of the lot and permanent financing in a single loan with just one closing.

With a traditional construction loan, you’d need to get a construction loan to finance the building of the home and then convert it to permanent financing once complete. The FHA One-Time Close simplifies this by combining everything into one loan upfront.

Once approved by an FHA lender, you’ll close on the full mortgage amount needed for the land purchase, construction, and permanent financing. The funds are disbursed over the course of construction You make no payments during construction, and once the home is finished, you begin making principal and interest payments on the permanent mortgage portion

Benefits of the FHA One-Time Close Construction Loan

There are several advantages to this bundled loan approach:

• Lower down payment – Only 3.5% down required due to FHA insurance

• Single closing – Saves on closing costs compared to two separate loans

• Fixed rates – Interest rate locked in upfront for permanent financing

• No requalification – You don’t need to reapply for the permanent mortgage

• LTV up to 96.5% – FHA will insure loans up to 96.5% loan-to-value

• Relaxed guidelines – More flexible credit and income requirements than conventional loans

• Low mortgage insurance – FHA mortgage insurance as low as 0.45% of loan amount

Tips for Finding the Best FHA One-Time Close Construction Lender

The key to getting approved for an FHA One-Time Close loan at the best rates is finding an experienced lender. Here are some tips:

• Search for HUD-approved lenders – Lenders must be approved by HUD to offer FHA loans. Verify their approval status.

• Ask about One-Time Close experience – Not all FHA lenders do these loans often. Find one with expertise.

• Compare interest rates – Rates can vary significantly, so shop around for the best deals.

• Look for local lenders – They will understand zoning and permit requirements in your area.

• Check reviews and ratings – Look at customer feedback on lenders before applying.

• Verify licensing – Make sure the lender is properly licensed to operate in your state.

• Understand all fees – Ask for a full breakdown of origination fees, closing costs, and other charges.

• Examine sample documents – Ask to see sample forms, disclosures, and paperwork before committing.

What to Expect During the FHA One-Time Close Loan Process

Once you select a reputable FHA One-Time Close construction lender, here’s a general overview of what to expect:

• You’ll complete a full loan application with financial details and choose a property lot.

• The lender will review your credit, income, assets, and other eligibility factors and provide pre-approval.

• After selecting a builder and finalizing blueprints and costs, the lender will provide approval and structure the full mortgage amount.

• At closing, funds will be disbursed to cover land purchase and initial construction costs. Remaining funds are escrowed.

• As construction progresses, the lender will release escrowed funds to the builder according to the draw schedule.

• Once construction is complete, the home must pass final inspection. Then you begin repayment on the mortgage.

While the process involves extra steps compared to a typical home purchase, an experienced One-Time Close lender will help guide you smoothly through construction financing.

Finding the Right FHA One-Time Close Lender Matters

The FHA One-Time Close construction loan program can make building a customized home affordable, even with limited funds for a down payment. But finding the right lender is key to getting approved on the best terms. Be sure to vet lenders thoroughly and ask the right questions before applying. With an experienced FHA lender handling the One-Time Close loan, you’ll be one step closer to turning your dream home into a reality.