Finding the Best FHA One-Time Close Construction Loan Lenders Near You

Buying land and building a custom home can be an exciting and rewarding process But securing financing requires working with mortgage lenders experienced with construction loans. FHA one-time close construction loans allow you to wrap up building costs, land purchase, and the permanent mortgage into a single loan with one closing But not all lenders offer these specialized loans.

Finding and comparing multiple fha one-time close construction loan lenders near you takes research and diligence to get the best loan terms. But the effort pays off with a streamlined construction financing solution.

What Is the FHA One-Time Close Construction Loan?

The FHA one-time close construction loan, also called the FHA single close construction loan, combines your construction financing and permanent mortgage into one loan and one closing. This avoids the hassle and expense of two separate loans and closings typical with traditional construction loans.

Once construction completes the loan automatically converts to a permanent FHA mortgage like an FHA 30-year fixed-rate loan. Ongoing loan payments and terms remain the same. There’s no need to requalify or complete new loan paperwork.

Benefits of One-Time Close FHA Construction Loans

The FHA one-time close construction loan offers several advantages over conventional construction loans

  • Lower down payment – Only 3.5% down required versus up to 25% on conventional construction loans
  • One loan/one closing – Simplifies the entire financing process
  • FHA flexibility – More lenient FHA credit and income requirements
  • Mortgage rate lock – Lock in a low rate on the permanent mortgage portion early
  • Purchase land – Finance land purchase as part of the loan

One-time close FHA construction loans give home buyers building a custom residence an affordable financing solution.

FHA Construction Loan Lender Options

FHA construction loans must be originated by FHA-approved lenders. But not all FHA lenders offer one-time close construction loans.

Lender options for FHA construction loans include:

  • Mortgage banks – Non-bank lenders licensed to originate FHA loans
  • Credit unions – Member-owned, not-for-profit financial cooperatives
  • Banks – Local banks and national bank lenders
  • Online lenders – FHA-approved lenders operating primarily online

Whether you choose an established bank or newer online lender, look for extensive FHA construction loan experience.

How to Find FHA One-Time Close Lenders Near Me

Searching for “fha one-time close construction loan lenders near me” helps you discover lenders in your local area. But look beyond just proximity to find the best lender match.

Follow these steps to locate top fha one-time close construction loan lenders:

1. Search HUD’s FHA Lender List

The U.S. Department of Housing and Urban Development (HUD) provides a searchable list of FHA-approved lenders on their website. Search by your state or zip code to find lenders in your region.

2. Check Online Mortgage Marketplaces

Mortgage websites like LendingTree allow you to enter your loan requirements and receive customized rate quotes from multiple lenders. This simplifies rate shopping.

3. Ask Your Real Estate Agent for Referrals

Experienced real estate agents often have relationships with lenders and can provide referrals. But still compare multiple loan offers and terms.

4. Contact Local Credit Unions

Many credit unions offer FHA construction loans with competitive rates. As member-owned non-profits, their rates may beat banks.

5. Research FHA Construction Loan Specialists

Some lenders specialize in FHA construction loans. Their expertise can ensure a smooth process. Ask about their FHA construction loan volume.

6. Compare Interest Rates and Closing Costs

Get rate and fee estimates from multiple lender candidates to find the best overall value. Look for “no origination fee” lenders.

7. Read Online Reviews

Customer feedback on sites like Trustpilot reveals actual borrower experiences. But don’t rely solely on reviews.

8. Interview Loan Officers

Have an intro call with each prospective lender to evaluate their knowledge, communication skills and responsiveness. The loan officer makes a big impact.

Shopping FHA construction loan lenders takes effort but gets you the financing you need on the best possible terms. The FHA one-time close construction loan combines all your financing needs into one convenient loan. Partner with an experienced local lender to build your dream home.

One-Time Close Construction Loan Overview

The decision between finding the perfect house and building the home of your dreams can be a difficult one to make. Both options require planning and there are many factors to consider, including which loan type is right for your needs.

Often, a borrower may buy a house with one mortgage, only to discover later down the road that there are renovations that need to be done or that they want to make additions, like extra bedrooms, and will need to refinance or take out a second loan to do so. With a One-Time Close Construction loan (also known as a Single Close Loan), you can build your dream home from scratch, designing it exactly how you want the first time, without the hassle and costs of multiple loans.

What are One-Time Construction Close Loan Requirements?

The requirements for One-Time Construction Close loans will depend on which type of loan you qualify for. For instance, in order to qualify for a VA OTC loan, you will need to meet the eligibility requirements for time served in the military or other qualified organizations, have a credit score of at least 620.

In order to qualify for an FHA OTC loan, you’ll need a minimum credit score of 580.

Other requirements that you will need to keep in mind depending on which loan type you apply for are:

  • Down payment: Each loan type will require the ability to pay a different down payment amount anywhere between 0% – 20%. Gifts or land equity may also be allowed as down payment assistance.
  • Mortgage insurance: Different loans types come with different mortgage insurance types that you may be required to have. These include Private Mortgage Insurance for Conventional loans and a mortgage insurance premium for FHA loans.
  • Proof of a steady and consistent income for a minimum of two years: This can include bank statements, W-2s, and tax returns.
  • Property requirements: One-Time Close Conventional loans allow for the property to be a primary or secondary residence. For One-Time Close VA and FHA loans, the property must be a primary residence. Investment properties are not allowed for any One-Time Close loan type.
  • Home plans and specifications, appraisals, and home inspections: Borrowers are required to have the home plans and specifications upfront in order to have the home appraised. In addition, a home inspection is required once the home is completed.

One-Time Close Construction loans are more complex than many mortgages on the market. Contact New American Funding to get more information about qualifications and requirements for these loans. A Loan Officer will be happy to answer your questions and help you find which loan is right for your unique needs.

FHA One Time Close Construction Loan Explained 2024

FAQ

Can you build a house using an FHA loan?

Yes, a new home can be purchased with an FHA loan. There are two programs available: You can either buy a home from a builder with a traditional FHA loan or you can use an FHA construction-to-permanent loan to finance the land, construction costs and the finished home.

What is the maximum DTI for a FHA construction loan?

FHA construction loan requirements Debt-to-income (DTI) ratio: No more than 43 percent (with some exceptions) Down payment: 3.5 percent with a credit score of at least 580, or at least 10 percent with a credit score between 500 and 579.

What is the minimum FICO score for a construction loan?

Minimum FICO score for construction loan: 580-640 Technically, 580 is the minimum fico score for construction loan. However, Mushlin says that in his experience, a higher credit score of at least 640 is usually needed for the FHA construction-to-permanent loan program.

Is an FHA loan a one-time thing?

While there’s no limit to how many FHA mortgages you can get during your lifetime, you can generally only have one FHA loan at a time because you can only have one primary residence. This restriction helps keep the loan program – and its lenient requirements – from being used to purchase investment properties.

Leave a Comment