FHA Construction One-Time Close Loan Program
The FHA One-Time Close construction loan, also known as FHA’s construction-to-permanent loan program combines the features of a construction loan (a short-term interim financing) and a long-term permanent mortgage with a single mortgage loan closing before the start of the construction.The FHA Construction One-Time Close (OTC) is available to borrowers who qualify for an FHA long-term financing. They are a single-close program instead of the two-time close programs that most conventional loans offer. It is the same as the FHA 203(b) loan program, all requirements and guidelines apply just the same. The borrower must qualify based on their credit, income and, assets (down payment and reserves requirement). The minimum down payment needed for an FHA construction loan is still 3.5% of the purchase price. The borrower must have a contracted with a builder or a licensed general contractor to construct the home or improvements. The borrower cannot act as the contractor unless he is also a licensed general contractor.
Product OverviewAn FHA Construction-to-Permanent(C2P) loan is distinctively used to finance the construction of the borrower’s new home and permanent mortgage all into one single transaction with one closing. The borrower will be approved for an FHA Construction-to-Permanent (C2P) loan if the borrower is qualified for the long-term permanent FHA mortgage. Upon the completion of construction, the borrower will be required to modify from the interim construction loan (ICL) into a permanent FHA fixed rate loan. There will be no additional closing or closing costs needed.
- 96.5% LTV based on Total Acquisition Cost Land/Home.
- 620 Mid FICO score required.
- Single Family Residence, Owner Occupied.
- One loan purchases land & builds the home.
- Loan amounts up to FHA conforming and high balance loan limits.
- One-Time Close (OTC) transaction.
- FHA Construction-to-Permanent(C2P) loan is made to the borrower. Consumer Direct.
- 12-month build time from date of closing and funding.
- The Borrower receives a bill monthly for construction interest accrual based upon funds dispersed thru the draw process to the builder.
Construction Loan Limitations:
- Lot/Land owned by the borrower for less than 12 months will be valued at the cost of acquisition or the appraised value whichever is less.
- Builder owned, 2nd homes and/or investment properties are not eligible.
- Gifted land allowed. Restrictions and gift guidelines will apply.
- Pool construction is permitted but certain restrictions will apply.