FHA One-Time Close Mortgage Interest Rates

November 5, 2019

Why do borrowers who want to build a house on their own lot turn to an FHA One-Time Close construction loan instead of conventional construction loans? Obviously not all do, but those who chose an FHA construction loan may be doing so for reasons that include a lower mortgage loan interest rate and a lower down payment requirement.

And those lower numbers work for construction loans, even for first-time home buyers.

One-Time Close loans do not feature FHA-required higher interest rates; at the time of this writing the mortgage loan rates for FHA loans is in a range between 3.375% and 3.5% for the most well-qualified borrowers. Those rates are subject to change on a  daily basis but in general FHA loan interest rates are lower than conventional mortgages.

Lender standards will vary depending on the bank, which is why you always read advice in finance blogs about shopping around for the best lender.

You will find some lenders more willing to work with you and your FICO scores than others. Compare lenders and their terms side-by-side to make the most informed decision you can.

What FHA Loan Rules Say About Setting Interest Rates for FHA One-Time Close Mortgages

HUD 4000.1, the FHA Single-Family Lender’s Handbook, instructs your participating FHA lender on how to process construction loans.

When it comes to interest rates, HUD 4000.1 explains that the interest rate you get on an FHA construction loan may vary depending on the phase of the project you are currently in:
“During the construction period, the interest rate may be variable. The Mortgagee and the Borrower must enter into an agreement that:
 

• Documents the range in which the interest rate may float during construction.
• Documents the point of interest rate lock-in.
• Specifies that the permanent Mortgage will not exceed a specific maximum interest rate.
• Permits the Borrower to lock in at a lower rate, if available and they have not already locked in a rate.

HUD 4000.1 adds that the lender is required to qualify you for the loan, “at the maximum rate at which the permanent Mortgage may be set.”


 FHA, VA, and USDA: One-Time Close Loans

Want More Information About One-Time Close Loans?

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) 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. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. 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.
 
FHA.com provides information and connects consumers to qualified One-Time Close lenders in an effort 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, and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.
 
Your email to [email protected] authorizes FHA.com to share your personal information with a 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 $750,000 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.