FHA Construction 3.5% Down Including Land

4.  FHA 3.5 and VA 100 Construction Loan Including Land

FHA Construction 3.5% Down Including Land

While most people think of using an FHA mortgage to purchase a home that has already been constructed, there is an FHA program designed specifically for those who wish to purchase land and build a home upon it. This FHA construction program, called the FHA One Time Close (OTC) loan, is very similar to standard FHA mortgages with the exception that it can be used to build a home instead of buying one. It combines the permanent home mortgage with a construction loan, which is why it’s referred to as a one-time close loan—if a buyer were to get the two separately, they would have to pay for two closings.

How Does it Work?

First, the applicant will need to find a plot of land and work out the costs of building a home on it. In some cases, the applicant will have to do this on their own, but in others, they may have help. For example, an applicant may use an FHA OTC loan to purchase an unbuilt house in a housing development.

Once the land and building costs are calculated and the loan is received, the buyer will need to pay 3.5% of the loan as a down payment. This amount is figured based on the total cost (i.e., land cost and building costs combined). The closing costs can also be included in the loan, as can the interest payments that would need to be made during the construction of the house.

If the applicant already owns the land that they are building on, the equity they have built up will act like a credit towards the down payment. In many cases, this means that the applicant will not have to make any down payment at all.

FHA OTC Requirements

In order to qualify for an FHA OTC loan, the applicant will have to meet the following requirements:

  • Have a credit score of at least 640
  • Have a debt-to-income ratio of no more than 45%
  • Have not declared bankruptcy in the past two years
  • Have not had a foreclosure in the past three years
  • Have not had any credit collections of more than $5,000 in the past two years
  • Have no open tax liens or judgments


*The down payment associated with this offer is from the borrower’s funds (the borrower’s funds must be sourced and can include gift funds or funds from approved Down Payment Assistance program). The down payment cannot be from the lender credit or a seller credit. Restrictions apply, consult your Personal Mortgage Advisor for details.

All home lending products are subject to credit and property approval. Rates, program terms and conditions are subject to change without notice. Corporate NMLS Unique Identifier # 32416. Verify a mortgage company or individual license on the Nationwide Mortgage Licensing System Consumer Access site: www.nmlsconsumeraccess.org. The interest on the portion of the credit extension that is greater than the fair market value of the dwelling is not tax deductible for Federal income tax purposes: and the consumer should consult a tax advisor for further information regarding the deductibility of interest and charges. U.S. Dept. of Housing & Urban Development Mortgagee-FHA Lender ID # 23773-0000-0, 23773-00017 (Unconditional Direct Endorsement Approved), USDA SFHGLP Approved, Department of Veterans Affairs VA Automatic Lender 56997-00-00. Nations Lending Corporation®

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John Yurkovich

John Yurkovich

My name is John Yurkovich. I am a branch manager and licensed loan officer NMLS # 206495. I have a passion for helping people obtain the American Dream of homeownership. I work extremely hard in becoming an expert in the available loan program guidelines, analyzing credit reports and understanding our clients financial picture.

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