The Lowdown on FHA OTC…
With the FHA OTC loan, borrowers can secure financing for the purchase of the land, the construction and the home’s permanent mortgage in a single closing. Only one closing means only one set of closing costs, helping save money. It also allows the process to move forward without interruption from potential snags in financing other aspects later on.
The Lowdown
on FHA OTC…
With the FHA OTC loan, borrowers can secure financing for the purchase of the land, the construction and the home’s permanent mortgage in a single closing. Only one closing means only one set of closing costs, helping save money. It also allows the process to move forward without interruption from potential snags in financing other aspects later on.
What is the FHA OTC Construction Loan?
The FHA One-Time Close (OTC) loan is a product that allows borrowers to combine financing for a lot purchase, construction and permanent mortgage into one first mortgage loan. Ideally suited for borrowers who are purchasing new construction, the FHA OTC loan offers the benefits of low money down financing, competitive interest rates and one closing for all financing.
And we have now simplified the program even further, with a single administration fee which includes the construction interest, as well as such things as:
- Construction draws
- Title updates
- Any necessary loan modifications
- Construction underwriting
- Construction closing coordination
What is the FHA OTC Construction Loan?
The FHA One-Time Close (OTC) loan is a product that allows borrowers to combine financing for a lot purchase, construction and permanent mortgage into one first mortgage loan. Ideally suited for borrowers who are purchasing new construction, the FHA OTC loan offers the benefits of low money down financing, competitive interest rates and one closing for all financing.
And we have now simplified the program even further, with a single administration fee which includes the construction interest, as well as such things as:
- Construction draws
- Title updates
- Any necessary loan modifications
- Construction underwriting
- Construction closing coordination
What is required for an FHA OTC Construction Loan?
The FHA OTC loan product is available to any borrower who meets the minimum qualifying criteria. This includes first time and repeat buyers. Here are the basic requirements for FHA OTC loan approval:
- Borrower must have contracted with a builder (must be licensed general contractor)
- Borrower must be purchasing the land at closing, or currently own their property
- At closing, after funds are disbursed to cover the purchase of the land, the balance of the mortgage proceeds must be placed in an escrow account to be disbursed as construction progresses
- Amortization of the permanent mortgage must begin no later than the first of the month following 60 days from the date of the final inspection or issuance of the Certificate of Occupancy
- Maximum loan amounts will vary by location
- Minimum FICO of 620
What’s required for
an FHA OTC Loan?
The FHA OTC loan product is available to any borrower who meets the minimum qualifying criteria. This includes first time and repeat buyers. Here are the basic requirements for FHA OTC loan approval:
- Borrower must have contracted with a builder (must be licensed general contractor)
- Borrower must be purchasing the land at closing, or currently own their property
- At closing, after funds are disbursed to cover the purchase of the land, the balance of the mortgage proceeds must be placed in an escrow account to be disbursed as construction progresses
- Amortization of the permanent mortgage must begin no later than the first of the month following 60 days from the date of the final inspection or issuance of the Certificate of Occupancy
- Maximum loan amounts will vary by location
- Minimum FICO of 620
What are the benefits of an FHA OTC Construction Loan?
Faster turnaround times, low construction admin fees, and the ability to apply various down payment assistance programs through our loan program are just a few of the ways Valor Home Mortgage can help you achieve your goal of building your dream home.
You only need to qualify once. If the borrower qualifies for long-term financing, they will be eligible for a one-time close construction loan. They don’t have to qualify again for the permanent funding after completion of the home construction.
Reduces the risk for the borrower. Since borrowers don’t have to qualify twice, they significantly reduce the risk of “re-qualifying” again once the house construction has been completed.
Fixed interest rate. The interest rate on a single-close construction loan can be locked a couple of months before the actual completion of the construction. The interest rate during the construction stage is pre-determined and will convert to a pre-determined rate when they close on the loan.
Reduced closing costs. A one-time close construction loan only has one closing, so they don’t have to pay for second closing costs.
Single appraisal requirement. Two-time close transactions require two separate appraisal reports, by two different appraisers, both paid by the borrower. A single-close construction loan only requires one appraisal before closing on the final loan.
Avoid intervening liens. An intervening lien happens when the borrower gets a two-time close loan that does not convert to permanent financing and requires a second closing for the second loan. The recording of the second deed of trust to pay off the construction loan will be present. Typically, this happens when the borrower disputes with the builder about the quality of craft. The final payment is withheld, and the subcontractor doesn’t get paid. In return, the subcontractor files a “mechanics lien,” which is an intervening lien.
Benefits of an OTC
Construction Loan
Faster turnaround times, low construction admin fees, and the ability to apply various down payment assistance programs through our loan program are just a few of the ways Valor Home Mortgage can help you achieve your goal of building your dream home.
You only need to qualify once. If the borrower qualifies for long-term financing, they will be eligible for a one-time close construction loan. They don’t have to qualify again for the permanent funding after completion of the home construction.
Reduces the risk for the borrower. Since borrowers don’t have to qualify twice, they significantly reduce the risk of “re-qualifying” again once the house construction has been completed.
Fixed interest rate. The interest rate on a single-close construction loan can be locked a couple of months before the actual completion of the construction. The interest rate during the construction stage is pre-determined and will convert to a pre-determined rate when they close on the loan.
Reduced closing costs. A one-time close construction loan only has one closing, so they don’t have to pay for second closing costs.
Single appraisal requirement. Two-time close transactions require two separate appraisal reports, by two different appraisers, both paid by the borrower. A single-close construction loan only requires one appraisal before closing on the final loan.
Avoid intervening liens. An intervening lien happens when the borrower gets a two-time close loan that does not convert to permanent financing and requires a second closing for the second loan. The recording of the second deed of trust to pay off the construction loan will be present. Typically, this happens when the borrower disputes with the builder about the quality of craft. The final payment is withheld, and the subcontractor doesn’t get paid. In return, the subcontractor files a “mechanics lien,” which is an intervening lien.
When is the FHA OTC Loan a good option?
The FHA One-Time Close loan program can provide an ideal solution for borrowers building a new home on a vacant lot and in need of financing. Borrowers who have a less-than-perfect credit rating or not a lot of cash available for a down payment will also find this program helpful; if a borrower wants the security of a fixed interest rate, is having trouble finding an available home, or simply wants custom home features then the FHA OTC Loan is a great option.
The FHA OTC Construction Loan Process
Here’s how our home loan process works:
- Complete our simple FHA One-Time Close Loan Qualifier
- Receive options based on your unique criteria and scenario
- Compare mortgage interest rates and terms
- Choose the mortgage loan offer that best fits your needs
- Let us connect you with an Elite Realtor to start the process towards building your perfect home
When is the
FHA OTC Loan
a good option?
The FHA One-Time Close loan program can provide an ideal solution for borrowers building a new home on a vacant lot and in need of financing. Borrowers who have a less-than-perfect credit rating or not a lot of cash available for a down payment will also find this program helpful; if a borrower wants the security of a fixed interest rate, is having trouble finding an available home, or simply wants custom home features then the FHA OTC Loan is a great option.
The FHA OTC
Loan Process
Here’s how our home loan process works:
- Complete our simple FHA One-Time Close Loan Qualifier
- Receive options based on your unique criteria and scenario
- Compare mortgage interest rates and terms
- Choose the mortgage loan offer that best fits your needs
- Let us connect you with an Elite Realtor to start the process towards building your perfect home
Whether you’re buying a new home, refinancing, looking for a cash-out, or just have questions about the process, our Elite Team of Mortgage Professionals will help you find the right mortgage solution!
Whether you’re buying a new home, refinancing, looking for a cash-out, or just have questions about the process, our Elite Team of Mortgage Professionals will help you find the right mortgage solution!
