Some new to the real estate market might assume they are not qualified to be approved for a construction loan, but these loans have the same kinds of terms and conditions that other mortgages do and you don’t need to have special credit scores to qualify. Home Purchase and Refinance Loans

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One-Time Close Loan Tips

February 18, 2020

One-Time Close (OTC) loans allow even a first-time home buyer to build a house on their own lot instead of having to choose from existing properties.

Some new to the real estate market might assume they are not qualified to be approved for a construction loan, but these loans have the same kinds of terms and conditions that other mortgages do and you don’t need to have “special” credit scores to qualify.

What does that mean? Simply that the typical credit score ranges used to qualify people for home loans is the basic standard for One-Time Close construction loans, too. Your lender might require slightly higher FICO scores depending on the size and scope of your construction project, but in general there are no unusual requirements to qualify for this loan.

Different Types of OTC Loans

There are VA, FHA, and even USDA One-Time Close loans, and whichever type you choose, you have the advantage of a government-backed mortgage with a lower down payment requirement (3.5% minimum) than non-government-backed mortgages.

Start Early

Because construction loans require permits and other documents that existing construction loans do not, you’ll need to put in some extra time to apply for permits when the time comes, to research plans and home designs, etc. Give yourself enough time to get it all done.

Save More

Your OTC loan proceeds will pay for the construction phase of the project, but you may encounter unexpected expenses along the way such as any required follow-up inspections, flood zone determination, and other costs. These are the same kinds of general expenses borrowers should anticipate when buying an existing construction home, too. Save a bit of extra cash to soften the economic impact of these costs when they arise.

Ask Questions

There are some not-so-obvious questions to ask about OTC loans. For example, what is the typical processing time for permit applications in that housing market? Is extra time needed to get these permits? In some housing markets, getting a permit can take many months longer than in other areas.

You should also ask what are typical completion times for these projects, how long you should expect to remain in your current home or rental unit, and if there are local permitting or environmental issues that could affect the completion of the project.

You should also ask the lender to show you a side-by-side breakdown of the OTC loan compared to an existing construction mortgage. This can be helpful if you don’t fully understand how the construction loan process works and need to see how quickly (or not) you can get into a new home.

It doesn’t pay to be in a hurry with a construction loan, so if you need a new home faster than the time it realistically should take to build a home, it may be better to look at a loan such as the FHA 203(b) home loan, an FHA Rehab loan for fixer-uppers, or even an FHA condo loan.

Construction Loans at 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. 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 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.

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