HUD Articles

What do borrowers need to know about FHA One-Time Close construction loans? There are two very important areas to keep in mind. One involves the lender’s specific requirements to qualify for this single-close construction loan, and the other involves FHA loan rules.

The two are not always identical and this is something to be aware of when going into the loan application process.

FHA One-Time Close mortgages are different than existing construction loans because the home must be designed, built, and paid for from the ground up and there are varying time frames under which this will be done.

Purchasing an existing construction home means getting to move in much more quickly, but the trade-off is that you are purchasing someone else’s home rather than having one built especially for you.

FHA One-Time Close Loan Requirements: Number Of Units Allowed

The FHA standards for One-Time Close or OTC construction loans includes the ability to apply for a loan to finance the construction of a multi-unit property. Under FHA loan guidelines you are permitted to apply for a loan for primary residences with as many as four living units.

Lender Requirements For FHA One-Time Close Construction Loans: Living Units May Be Restricted

Some participating lenders may not approve FHA OTC construction loans for projects involving more than one living unit. Be sure to ask your loan officer whether you can get approved for a mortgage on a construction project with more than one living unit.

FHA Loan FICO Score Standards Versus Lender Requirements

Like most other FHA mortgages, FHA One-Time Close construction loans have FHA minimum FICO score requirements (580 or higher for maximum financing and the lowest down payment) but the lender’s standards are usually higher.

You may find that for OTC loans, lender FICO score requirements may trend higher than for existing construction loans. In some cases the lender may also have additional credit history requirements such as no late payments or missed payments of any kind on housing-related payments (rent or mortgage) within a certain span of time leading up to the mortgage.

Be sure to ask your lender how their standards may vary from the FHA minimums.

We have done extensive research on FHA One-Time Close mortgages and spoke directly to these licensed lenders for most states. These are qualified mortgage loan officers who work for lenders that know the FHA One-Time Close product well.

Each company has supplied us 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.

Your response to onetimeclose@fhanewsblog.com authorizes FHANewsBlog.com to share your personal information with a licensed mortgage lender in your area to contact you.

Please note that the FHA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes).

1. Send your first and last name, e-mail address, and contact telephone 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? Yes or No. If either of you are eligible veterans, 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.