This Single Close Loan gets you from construction to occupancy with one mortgage in a streamlined process.
What is a One-Time Close (OTC) Loan?
The One-Time Close Loan is a mortgage program that finances the lot purchase (if necessary), the construction and permanent loan of a new home, all wrapped up in a single mortgage with a single closing. That’s why it’s called a “One-Time Close.”
These loans offer several advantages over some traditional mortgage loans:
- Avoid depleting savings or maxing out credit cards
- Build equity faster by increasing the value of the home
- Low interest rate and one monthly payment
What are the Benefits?
- Only one closing means only one set of closing costs, helping save money. It allows the process to move forward without interruption from potential snags in financing other aspects later on.
- The One-Time Close (OTC) has a maximum loan-to-value (LTV) of 3%. This gives the borrower the freedom to close with as little as a 3% down payment
- Once the construction phase is complete, the borrowers do not have to requalify for a permanent mortgage since the permanent loan is closed before construction begins.
- Since the permanent mortgage is closed before construction begins, the fixed rate on the loan will not be subject to change during construction phase or at any point.
How do One-Time Close Construction Loans work?
On-time construction loans fund your home construction and convert to a traditional mortgage with terms of 10-30 years. A one-time construction loan only involves one set of closing costs. You will be able to draw funds during critical periods of the construction phase, up to a predetermined amount.
Typically, you will have up to a year to complete the construction and be able to make interest only payments during the construction phase.
Types of Construction Loans
Single closing construction loans come in several different types. Here are the most common one-time construction loans.
Conventional One-Time Close
Conventional one-time construction loans may have a higher down payment requirement than other loan programs. However, many conventional programs offer lower interest rates, especially for borrowers who can meet the financial and credit score requirements.
VA One-Time Close
Qualified Veterans and Active Military Personnel might consider a VA one-time close loan. These loans don’t require a down payment and borrowers are not required to make any payments until they occupy the home.
FHA One-Time Close
Backed by the Federal Housing Administration (FHA), FHA single-close construction loans provide and affordable solution for borrowers who can’t meet the stringent requirements of conventional loan programs. FHA allows you to purchase the land and fund the construction costs with a down payment as little as 3.5%
USDA One-Time Close
Backed by the US Department of Agriculture (USDA), USDA single-close construction loans provide a no down payment required construction loan including the land and construction costs.
Typically, you will have up to a year to complete the construction and be able to make interest only payments during the construction phase.
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