If you’re thinking about building your home from the ground up using a One-Time Close loan, your down payment depends on the type of mortgage you seek -- VA, FHA, USDA, conventional, etc. Down payments requirements can range from zero to 20% and is separate from closing costs.

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How Much Down Payment Do I Need to Build My Home?

May 29, 2023

If you’re thinking about building your home from the ground up using a One-Time Close construction mortgage, one of the first questions you are likely to ask about this type of loan is how much you’ll be required to provide as your down payment.

The answer depends greatly on the type of construction loan you seek, and in at least one case you may not be required to make a down payment but it could be in your interests to do so anyway. How much down payment do you need to build a home from the ground up?

Home Loan Down Payment Basics

Basically speaking, your down payment depends on the type of home loan you seek. This is in reference to the type of loan; VA, FHA, USDA, conventional, etc. Remember that for government backed mortgage loans such as FHA, USDA, and VA mortgages, the down payment requirement is a completely separate issue from your other closing costs.

That means that any money you pay in closing costs is NOT deducted from the down payment requirement. You’ll need to anticipate both closing costs and the down payment amount when saving up for the loan.

How Much Down Payment Is Required?

For conventional loans, the down payment requirement will vary depending on your lender, but in general if you want to avoid Private Mortgage Insurance (PMI) you’ll likely have to pay 20% down, which can also earn you a lower interest rate in some cases.

No Money Down Construction Loans

VA and USDA construction loans may feature a zero-down payment option, but in the case of VA One-Time Close loans, you may find that making a down payment can help you reduce the cost of the VA Loan Funding Fee.

Making a down payment also helps lower the monthly mortgage payment you’ll be making once the loan closes in any case, but the reduced VA loan funding fee can help further reduce the overall costs of the loan.

In general, VA loans that do not require a down payment may still require money up front if the sale price of the property exceeds the appraised value. This is not quite the same as a down payment--the money up front is required to make up the difference between the appraised value and the sale price. But in general, for construction loans the down payment issues you’ll be concerned with have more to do with sourcing of funds where applicable.

Low-Down Payment Construction Loans

FHA One-Time Close Construction loans require a minimum 3.5% down payment, the same as all other FHA purchase loans. This low down payment may seem surprising to those who have never explored their construction loan options before, but the FHA loan program was designed to help people find affordable homes with a lower up front financial burden.

Construction Loans and Down Payment Assistance

In general, if you seek a construction loan you should expect to provide your own down payment. Many lenders will not permit down payment assistance on construction loans. There is no specific prohibition in FHA or VA loan rules saying construction loans cannot have down payment help, but lender standards also apply and you may find that down payment assistance isn’t allowed with that financial institution. If you need a construction loan, it pays to begin saving for your expenses and down payment as early as you can.

Construction Loans at OneTimeClose.com 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) 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. 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 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 and VA 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, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.

Contact Us: Send Us Your Request – Spam Safe

Please send your email request to [email protected] which authorizes FHA.com 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 $1,500,000 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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