Why Consumers Are Better Off With Single-Close Construction To Permanent Loans
Single-close construction loans aka One Time close VA construction loans not only save time and money; they also reduce interest rate risk and requalification risk.
VA construction loan featuring the One-Time Close (OTC) Benefits
There are different benefits to getting a VA Construction Loan. You would find that the OTC loan offers more advantages than 2 closings.
VA Construction loan Saves Time and Money
One of the best parts of a VA Construction loan or any one-time close construction loan is that it saves time and money. You can secure financing for the purchase of your land, construction, and permanent mortgage of your home in a single closing. This means you save money as you don’t have to pay double the closing costs, and you can also save time.
Once your home has been built, the borrowers will not have to re-qualify for the permanent mortgage. That’s because the permanent mortgage is closed before the construction even starts.
Low or No Down Payment
The LTV ratio for OTC construction loans is between 90% and 100%. This means that borrowers would only need a down payment from 10% to nothing at all, depending on the construction loan that you apply for.
Fixed Interest Rate
The interest rate for an OTC loan is fixed. Since the permanent mortgage is closed before construction starts, the interest rate would not change during the construction phase or even after. You won’t have to worry about the interest rate suddenly increasing while your house is being built.
Financing for Construction, Lot Purchase, and a Permanent Mortgage
A VA one-time close construction loan is amazing because it lets you build a home with a VA loan, FHA loan, conventional loan, or USDA loan and it can cover the cost of the land and the construction in one close.
What Are One-Time-Close Construction Loans?
One-time close construction loans are mortgages designed to help you build a home in a reasonable amount of time such as 6 months. When you close on a one-time close construction loan your rate is locked and permanent as opposed to construction to permanent mortgages. Construction to permanent mortgage loans typically have a variable interest rate, and when the home is finished, you’ll seek permanent financing.
The Financing Process
- Get pre qualified
- Find a builder and get them approved by the lender. If it’s a VA loan to build a house then make sure your builder is registered with the VA too.
- Find land
- Make plans
- Get your plans approved by the lender
- Submit your file to Underwriting
- Clear to close
- Close on your loan and start construction
- Finish Construction and move into your new home!
Single Close Construction Loan Program Options
- VA construction loan aka VA one-time close construction loan
- FHA otc loan
- Conventional construction loan
- USDA one-time close construction loan
One-Time Close Construction Loan FAQs
How Will A Borrower of a One-Time Close Construction Loan Receive Their Funds?
A borrower of a one-time close construction loan will receive their funds through an escrow account. Once the loan is closed, the amount will be kept in an escrow account and disbursed for construction as needed.
What is the Minimum Credit Score for An OTC Construction Loan?
The minimum credit score for an OTC construction loan is 580 and up, but it depends on the loan that you get. An FHA OTC construction loan requires a minimum FICO of 620, but an FNMA OTC construction loan.
Which VA lenders work with VA construction loans?
Security America Mortgage specializes in helping Veterans with the VA Construction Loan. They are one of the few VA construction loan lenders out there because this is a specialty niche loan that has become more favorable in 2023.
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