There is a big difference between FHA One-Time Close (OTC) construction loan program and the VA One-Time Close version. FHA OTC loans require a down payment, while VA mortgage loans allow qualified borrowers the option of a zero-money down construction loan. Home Purchase and Refinance Loans

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Down Payment Rules for VA One-Time Close Construction Loans in 2023

July 4, 2023

There is a big difference between the FHA One-Time Close (OTC) construction loan program and the VA One-Time Close version; FHA OTC loans require a down payment, while VA mortgage loans of all kinds (including OTC) allow qualified borrowers the option of a zero-money down construction loan.

The ability to get a no-money-down VA construction loan is a big advantage; naturally if you are reading this you will want to know whether you qualify for a VA One-Time Close loan to build a home from scratch for with no down payment.

VA home loans, whether they are construction-to-permanent loans like OTC or for the purchase of existing construction homes, are only offered to military members and qualifying surviving spouses of military members who served a minimum amount of time on duty.

As a benefit offered in exchange for military service, VA home loans are not available to borrowers outside those qualifications the way FHA mortgages are. FHA loans are open to any financially qualified applicant.

Borrowers who qualify for a VA loan may also qualify to choose the FHA OTC option instead. However, those who qualify for an FHA mortgage are not necessarily eligible for the VA loan program.

VA down payment rules for One-Time Close construction loans (as well as other types of VA mortgages) allow the borrower to make a down payment if one so chooses.

Doing so can bring another angle of VA One-Time Close loans have that their FHA counterparts do not feature-the ability to lower the VA loan funding fee by making the right size down payment.

The VA loan funding fee is required for most VA loan transactions. Exceptions are made for those who receive, or who are eligible to receive VA disability benefits based on VA-rated, service-connected medical issues.

This means that veterans who qualify for VA disability pay can get the dual benefit of a VA One-Time Close construction loan featuring no down payment AND no VA loan funding fee.

If you are not sure whether you qualify for this, work with a loan officer or contact the VA directly to access a copy of your VA Loan eligibility paperwork to see if your status is currently listed and what your VA loan funding fee obligation is at the time of that request.

What is an FHA Construction or VA Construction One-Time Close Loan?
One-Time Close Construction Loans are available for FHA and VA borrowers. These loans also go by the following names: 1 X Close, single-close loan, or OTC loan. This type of loan allows 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) and the VA (Department of Veterans Affairs) 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. If you are interested in being contacted by a licensed 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 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 One-Time Close Construction Program only allows for owner-occupied-single family dwellings (1 unit) - and NOT for multi-family units (no duplexes, triplexes or fourplexes). You CANNOT function as your own general contractor (Builder) / not available in all states.
In addition, the following homes/building styles 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.

Contact Us:  Send us your Request - Spam Safe
Please send your email request to [email protected] which authorizes to share your personal information with one mortgage lender licensed in your area to contact you.
  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 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.
  4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per 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, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.

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