What is the FHA Construction One-Time Close Program? How Does it Work?
A Construction-to-Permanent (C2P) single-close program includes a short-term interim or temporary construction period and a long-term permanent mortgage. A borrower using the FHA construction one-time close program must qualify for a long-term mortgage to utilize the construction-to-permanent program. Upon final completion of the construction, the borrower’s closed loan will require a modification of the short-term interim construction period into a permanent fixed-rate loan.
General Product Description
The construction-to-permanent loans are structured as follows:
- The Construction-to-Permanent loan will be structured as a C2P loan transaction with a purchase price if the borrower is purchasing the land in the transaction.
- The Construction-to-Permanent loan will be structured as a C2P loan transaction as a refinance if the borrower owns the land at the time of application.
- The Construction-to-Permanent loan must comply with all FHA and Fannie Mae construction guidelines.
FHA offers construction loans anywhere to qualified borrowers. They are the one-time close instead of the customary two-time close on conventional loans. It is precisely a 203b loan, all guidelines still apply, contrary to what people think. If you qualify for an FHA 203b loan, you are eligible for an FHA construction loan. JLA is one of the mortgage lenders that offer an FHA one-time close mortgage for construction loans. As stated, borrowers have to qualify based on their income, credit, and asset requirement (down payment). The minimum down payment requirement is still 3.5% of the Sale price. Unlike the two-time close on conventional loans where borrowers are expected to make payments on the interest of the loan, no payment is due until the construction has been completed.
- All borrowers must apply and qualify for an FHA loan with the lender;
- The borrower finds a builder, who has to be approved by JLA; builder has to submit all required documents per FHA guidelines;
- Borrower and builder agree on a final Sales Price;
- The loan is processed as a regular FHA 203b loan;
- Borrower close on the mortgage loan; construction shall commence after which;
- The builder is required to complete construction of the home in 5 months;
- The borrower does the final inspection and signs the certificate of occupancy, then makes first payment 60 days from date.
- All FHA 203b guidelines apply, no overlays;
- The borrower makes no payment during the construction period;
- Homes can be built on borrower’s own land or lot;
- The loan is available anywhere in the continental US;
- The first payment is due after completion; after final inspection and certificate of occupancy is signed by the borrower.
The FHA construction loan is a standard FHA 203b loan. Therefore, the general FHA guidelines apply. The credit, income and asset requirement is the same as the traditional way to purchase a home as if they are buying an existing home. The FHA 203b one-time construction loan is one of our niche products. Additional information or detail is available by contacting our FHA Home Loan Consultants at (866) 772-3802.