Builder Benefits for FHA One-Time Close Loans
FHA Construction Loans for Building Homes
The FHA Construction-to-Permanent program is an avenue that many builders should explore when looking for additional business. By partnering with pre-approved homebuyers, contractors can take advantage of a smooth, start-to-finish process that allows consumers to purchase and build a home according to their liking, all in a single mortgage.
Builder Benefits
When building a home, most conventional mortgages require the borrower to qualify twice—once for the construction loan and again for the purchase. The FHA One-Time Close Loan, on the other hand, skips the tedious requalification process, which involves a second credit check and presentation of documents. Not only is this a cost and time saving step, but it also protects builders involved in the loan against unforeseen circumstances, such as buyers losing their jobs or taking a hit to their credit scores.
Sellers and builders can make contributions of up to 6 percent toward the homebuyer’s closing costs and prepaid items. Any contribution funds beyond that are reduced, dollar-for-dollar, from the loan amount. The high, 6-percent threshold allows buyers to receive the same financing without having to forfeit contributions.
Borrowers can take advantage of FHA’s lenient underwriting criteria, such as lower debt-to-income ratios compared to other conventional loan types. These perks make the FHA One-Time Close Loan appealing to many potential homebuyers, making it an opportunity for builders to gain contracts.
When financing with a Construction-to-Permanent loan, funds are drawn in phases, up to 5 times. A draw schedule is created by the lender, which the buyer and builder agree to. This ensures that all contractors are paid on time, as the project progresses.
Among the many advantages that come with an FHA loan, builders and buyers understand that the low down payment requirement is 3.5 percent. Additionally, the entire amount can be covered in gift funds which attracts more consumers.
There is a growing number of individuals that have an immediate need for small- to mid-size homes built from scratch. FHA.com works with licensed FHA lenders who specialize in the One-Time Close Loan process to pre-approve potential homebuyers looking for builders to do the job. Builders have an opportunity to be first in line to be paired up with these individuals and take on projects that would otherwise fly under the radar.
For Builders interested in receiving the FHA One-Time Close Builder registration approval form, please send your request to [email protected].
One-Time Close Construction Loans
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FHA Loan Articles and Mortgage News
April 29, 2024 - U.S. News and World Report published an article in April 2024 that included data from a U.S. News survey of American mortgage trends this year. In that survey, nearly 70% of house hunters who responded say they are waiting for home loan interest rates to fall before buying a house this year.
April 28, 2024 - Buying in cash does not necessarily mean you will get a big discount on the house. It’s all the same to the seller, who gets their money, either way. In more competitive housing markets, the cash offer is more appealing to some because it may work faster than dealing with a lender.
April 26, 2024 - During the second quarter of 2024, 30-year fixed-rate FHA mortgage rates were listed in the low 7% range, a place many hoped would be in the rearview mirror by now. What do respected market watchers say about the current state of the housing market regarding mortgage rates?
April 24, 2024 - Finding or building your dream home means paying attention to many important details. Is the house you want large enough to live in for 5 to 10 years without outgrowing it? Is your house close enough to essential services like child care or school?
April 21, 2024 - Are home loans riskier in 2024 due to elevated potential for scams and fraud? Fraud prevention company Funding Shield reports high fraud vulnerability in roughly half of all portfolio loans, including residential mortgages, in the first three months of 2024.
