Construction Loans for 2020: Build a House on Your Own Land

December 6, 2019

Is 2020 the year you have a house built on your own lot with a loan 3.5% down payment? (If you are a qualified veteran, that down payment amount is 0% to build on your own land as long as the appraised value matches or is higher than the asking price).

The One-Time Close construction loan, which features a single application and closing date for both phases of the mortgage (the construction phase and the mortgage itself), lets even first-time home buyers apply for a loan to build rather than buy an existing home.

But how do you know you are ready for such a loan? An important question to ask-how long have been planning and preparing for the new loan?

Unless you have enough time to sort out potential problems (some borrowers find they must have a credit report corrected, or find they need more time to work on credit or saving for the down payment), you could be cheating yourself.

All borrowers applying for a new home loan should have a minimum of 12 months of on-time payments on their credit record at loan application time. Do you know when your last late or missed payment was? Do you know what your credit report says about your payment record?
For those who do not know, find out as soon as possible-do not delay getting the answers in this area as it may affect how you proceed with the rest of your planning stage.

FICO scores are very important. If yours are below 640, you may technically qualify for an FHA mortgage under the rules found in HUD 4000.1, but additional lender standards also apply. Don’t assume that credit score requirements are the same, lender-to-lender. They are not.

Budgeting for your FHA mortgage payments is also important in the planning stages. Mortgage payments aren’t just about principal and interest (P&I);  your mortgage payment will include mortgage insurance premiums, any required hazard insurance, property taxes, and homeowner association fees where applicable.

With all this in mind, it’s best to take a minimum of 12 months to save, budget and research the mortgage loan. You will be glad you did.

Sorting out important details ahead of your loan application is very important. What neighborhood do you want to live in? Are there lots available to build your home from scratch? Do you have an idea of which contractors you might use to build the house? It’s good to review your priorities, your resources, and your financial resources as early as possible ahead of a construction loan application.


 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.