FHA and VA loans are very popular options for home buyers who want to buy a home with a low down payment. FHA loans require only a 3.5% down payment, while VA loans require no down payment at all.
However, these loans are rarely used for new construction. This is because most lenders require a borrower to get separate loans for lot purchase, construction, and a permanent mortgage when the home is completed. So, for example, a veteran building a new home would complete only the permanent mortgage through the VA loan program. The veteran would still have to make a down-payment – which can run as high as 15 – 30% on a new construction loan – and pay closing costs on the initial loans. Obviously, this makes building a new home less attractive to buyers who know a VA loan or FHA loan will be their best option.
One Time Close VA and FHA Loans
A one-time close loan rolls everything into a single mortgage loan, with just one application process and one closing. A very few lenders – now including Hurst Lending & Insurance – are able to offer one time close loans to VA and FHA borrowers for the purposes of building a new home.
These loans can bring an otherwise unattainable dream within reach for many buyers, by dramatically lowering the out-of-pocket costs of purchasing land and building a home. FHA loans are available for borrowers with lower credit scores. In short, these loans enable more Americans to build the home of their dreams.
Benefits of a One-Time Close VA or FHA Loan
- Buyers need very little down-payment
- 100% LTV VA loans for new construction
- 96.5% LTV FHA loans for new construction
- Credit scores down to 560 can be accepted for VA and FHA loans
- Land can be included in the mortgage
- Loan is fully approved and appraised prior to construction taking place, eliminating the risks of over-building or becoming un-qualified during construction
- Efficient one-time close, no need for a separate construction loan and a permanent mortgage
- Fees and construction phase interest can be rolled into the loan
The only requirement following construction is an inspection to ensure the home was built to specifications of the contract.