The FHA One-Time Close Construction Loans is one of the most popular home mortgage programs at Capital Lending Network, Inc.

• The U.S. economy was booming prior to the coronavirus outbreak in 2020
• The historic low unemployment rate of under 3.5%
• The Dow Jones Industrial Averages hit 29,000 for the first time in U.S. history
• Homeownership was at its peak in history
• Mortgage rates were setting record lows month after month
• The housing market was booming with no sign of any correction
• The booming economy and housing market were frustrating for homebuyers

There was far more demand for housing than the inventory of homes.

Skyrocketing Home Prices

Due to such a strong demand for homes, home prices kept on going up making many homebuyers being priced out of the market. Then, with no warning, the coronavirus outbreak hit the nation like a freight train. The whole country came to a halt. The Dow Jones plummeted as low as 18,000 and other stock market indices followed in a downward spiral. Unemployment rates tanked to close to 20% and many economists and analysts were predicting a 35% unemployment rate by the end of 2020. Over 50 million Americans filed for unemployment.

Most economists and analysts forecasted a Great Recession and economic meltdown in 2020 that would be worse than the 2008 real estate and credit meltdown. Many pre-approved homebuyers suspended their home shopping until further notice. Homebuyers were listening to the so-called experts and economists and hoping for a substantial housing market correction. The government and Trump Administration were on high alert mode.

President Donald Trump signed The CARES ACT which offered economic stimulus to businesses and individual taxpayers. Many Americans thought Joe Biden winning the 2020 Presidential election would for sure ruin the U.S. economy and plummet the housing market. The Biden Administration sure did ruin the economy. Inflation soared and everything Joe Biden touched turned to disaster. However, the housing market kept on booming with home prices skyrocketing.

Opportunity To Building A New Construction Home During A Booming Housing Market

The Central Bank lowered interest rates to zero percent for the first time in history which plummeted mortgage rates:

• All of a sudden, the economy started to recover
• The coronavirus economic recovery was the fastest recovery in world history
• Unemployment numbers improved month after month
• The most recent unemployment numbers are at 6.9%
• The housing market is stronger now than it was prior to when the coronavirus outbreak hit the nation in February 2020
• Homebuyers never saw the housing correction experts were predicting
• Many homebuyers have been priced out of the booming housing market
• However, HUD’s FHA One-Time Close Construction Loans gives homebuyers an opportunity to purchase a brand new construction home with an FHA loan
• FHA One-Time Close Construction Loans are becoming very popular throughout the nation

In this article, we will discuss and cover the FHA One-Time Close Construction Loans On Home Purchase.

Benefits Of The FHA One-Time Close Construction Loans

Who doesn’t want to purchase a brand-new house? Most do. However, it takes time and planning to buy a new construction home. Homebuyers can now get financing in the total costs in building a new construction home with FHA One-Time Close. Construction Loans. FHA One-Time Close Construction Loans allow homebuyers to finance the cost of a lot, cost and all expenses of building a home, and convert the lot and construction costs into a permanent FHA loan after the construction has been completed.

So, the total cost of a new build home will be under one mortgage and one closing with FHA One-Time Close Construction Loans. Prior to the introduction of FHA One-Time Close Construction Loans, most borrowers needed a 20% to 30% down payment for construction loans offered at banks. Now with only 3.5% of the after the complete appraised value of the home, anyone who can meet the minimum HUD Agency Mortgage Guidelines can qualify to build a new home with an FHA loan with one closing.

Construction One Time Close Loan

One-time close construction loans are a type of mortgage that finances the purchase of land and the construction of property simultaneously. This loan eliminates the need to obtain a separate construction loan and permanent mortgage.

The main advantage of a one-time close construction loan is that it saves borrowers the time and hassle of applying for two separate loans. It also may save you money by eliminating the need to pay for two sets of closing costs.

If you’re thinking about building a new home, a one-time close construction loan may be the right financing option for you. Here’s what you need to know about this type of loan.

What is a One-Time Close Construction Loan?

A one-time close construction loan is a type of mortgage that finances the purchase of land and the construction of property simultaneously. This loan eliminates the need to obtain a separate construction loan and permanent mortgage.

With a one-time close construction loan, you’ll apply for just one loan, closing on the property and beginning construction at the same time. Once construction is complete, your loan will convert into a traditional mortgage. One-time close construction loans are also known as “all-in-one” or “single-close” loans.

 

How Does a One-Time Close Construction Loan Work?

A one-time close construction loan works like any other type of home loan. You’ll need to submit an application with your lender, including information about your income, employment history, and debts.

Your lender will also need information about the property you’re planning to build, including the purchase price, plans, and specifications. Once you’re approved for the loan, you’ll close on the property and begin construction.

During construction, you’ll make interest-only payments on the loan. Once construction is complete, your loan will convert into a traditional mortgage, and you’ll begin making principal and interest payments. One of the main advantages of a one-time close construction loan is that it offers flexibility when it comes to your down payment.

With some construction loans, you’ll need to put down a large down payment upfront – as much as 20% of the total loan amount. With a one-time close construction loan, you may be able to finance your down payment using the equity in your land. This means you won’t need to come up with as much cash upfront.

Another advantage of a one-time close construction loan is that you’ll only pay closing costs once. With a traditional construction loan, you’ll pay closing costs on the initial loan and then again when you refinance into a permanent mortgage.

One-time close construction loans can also save you money by eliminating the need for private mortgage insurance (PMI). PMI is typically required if you put down less than 20% on a conventional mortgage. But because a one-time close construction loan finances the purchase of land and construction of a property simultaneously, you won’t need to pay for PMI.

What Are the Disadvantages of a One-Time Close Construction Loan?

One of the main disadvantages of a one-time close construction loan is that it typically requires a higher credit score than other types of home loans. If you have a lower credit score, you may not be able to qualify for this type of loan.

Another disadvantage is that one-time close construction loans often have higher interest rates than traditional mortgages. This is because they’re considered riskier loans – after all, anything can happen during construction, and the borrower may not be able to finish building the home.

FHA Construction Loans Suspended in 2019/2020

For many people, the thought of securing a loan to finance a construction project – whether it’s for a new home, an addition, or renovations – can be daunting. There are so many aspects to consider and the process can be complicated and time-consuming. But with careful planning and a clear understanding of the construction loan process, you can make the experience much smoother and less stressful.

Unfortunately, the current state of the economy has resulted in construction loans becoming much more difficult to obtain. Lenders are now requiring higher down payments and stricter credit criteria. As a result, many people who would have previously qualified for a construction loan are now being turned away.

If you’re thinking about undertaking a construction project, it’s important to be aware of the current landscape so you can make the best possible decisions for your situation.

Here are three things you need to know about obtaining a construction loan in today’s market:

• Construction loans are more difficult to qualify for.
  • As mentioned, due to the current state of the economy, lenders are now much stricter when it comes to approving construction loans. They’re requiring higher down payments and borrowers must have excellent credit scores. If you don’t meet these criteria, it will be very difficult to obtain a loan.
• You may need alternative financing options.
  • If you can’t qualify for a construction loan or if you don’t have the necessary down payment, you may need to look into alternative financing options. There are a few different options available, including home equity loans, personal loans, and credit cards. Each option has its own set of pros and cons, so be sure to do your research before making a decision.
• The process can be complex and time-consuming.
  • Even if you do qualify for a construction loan, the process can be complex and time-consuming. There are a lot of different steps involved, from applying for the loan to securing permits to actually starting construction. It’s important to be prepared for this so you can avoid any stressful surprises along the way.

Understanding How FHA One-Time Close Construction Loans Work

There is no doubt there is more work and red tape involved when building a new home. It is not as easy as buying a home that has been built. However, it is not all that difficult either if you set proper expectations and understand the mortgage process. Every case is different but we will outline the basic general steps on how the FHA One-Time Close Construction Loans work. For more detailed information please contact us at Capital Lending Network, Inc. at 888-900-1020 or text us for a faster response. Or email us at contact@capitallendingnetwork.com. The team at CLN Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

FHA One-Time Close Construction Loans enable homebuyers to get a package mortgage loan program that will finance the lot, and construction homes, and turn the temporary construction loan to a permanent end loan after the construction is complete.

Steps On Qualifying For FHA One-Time Construction Loans

Borrowers need to meet all minimum HUD Agency Guidelines on FHA Loans since One-Time Construction Loans are FHA loans. The homebuyer needs to come up with a 3.5% down payment of the completed value of the home and have a minimum credit score of 580 FICO.

Borrowers who already own the lot and are paid for can use the value of the lot as the down payment in the construction loan transaction. The borrower is in charge of choosing a general contractor. The general contractor will need to be vetted and approved by the mortgage company. After the general contractor has been vetted and approved by the mortgage company, the mortgage process begins.

First Step In The Mortgage Process

The first step in the FHA one-time close construction loan process is to shop for a lot to build your new home. Some borrowers may already own the lot. Others who need to purchase the lot will get a maximum budget on how much they can spend on a lot purchase. You need to go over your plans with the general contractor/builder. The builder will refer you to his architect. Many architects already have copyrighted drawings they have used before which you can go over and make your own custom modifications.

Construction Budget

The maximum construction budget depends on how much you qualify for up to the maximum FHA loan limit for the area you are building. Your builder will come up with a scope of work and plans. Costs of construction need to be detailed and itemized.

Submitting Plans And Cost Of Construction To Lender

Once the contractor/builder/architect has completed the plans and cost of construction, they are submitted to the lender for review and approval. The file is processed by an assigned new construction mortgage processor. The processor makes sure all documents and paperwork are in order so she can submit them to a new construction mortgage underwriter. A new construction mortgage underwriter is assigned to the file. Once the mortgage underwriter has reviewed the plans and costs and has qualified the borrower, the underwriter will issue a conditional loan approval.

The Mortgage Process

The file goes back to the new construction mortgage processor so she can clear the list of conditions requested by the mortgage underwriter. The mortgage processor in charge of the project will contact the general contractor/builder and/or other parties and gather the list of conditions.

Once all conditions are gathered, the mortgage processor will submit the conditions for a clear to close. After the mortgage underwriter has reviewed the conditions and is satisfied with the file, the underwriter will issue a clear to close. With the clear to close, the closing department of the mortgage company will contact the title company and arrange a closing date.

Start Of Construction

Once the loan has closed, the construction project can begin. Once the construction project is complete and a certificate of occupancy is issued, the borrower can move in and the loan is then converted to a permanent FHA loan with a 30-year fixed-rate mortgage. FHA One-Time Close Construction Loans is a great loan program for homebuyers whose dream is to buy a brand-new home.

If you need to get started to see if you qualify and start the mortgage process, please contact us. The team at Capital Lending Network, Inc. is available 7 days a week, on evenings, weekends, and holidays. Capital Lending Network, Inc. NMLS 1657322 is a mortgage company licensed in multiple states with no lender overlays.