(302) 703-0727

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Conventional One Time Close Construction Loan

John Thomas April 11, 2022 Tags: ,
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The Conventional One Time Close Construction Loan is a home mortgage that allows borrowers to purchase a lot, build a home and obtain a permanent mortgage all combined into one first mortgage loan with one closing. It is a great option for borrowers wishing to build their own home with a private builder. If you are interested in a conventional OTC construction loan, then give the John Thomas Team a call at 302-703-0727 or APPLY ONLINE

Conventional One Time Close Construction Loan Highlights

The Conventional OTC Construction Loan has all of the following features which make it a great option for building your own new construction home:

  • Single Closing, where borrower pays interim construction financing on an interest only basis during construction phase.
  • 95% Maximum LTV for Primary Residence
  • For Construction-to-Permanent, closing occurs before construction begins
  • Closing Costs can be financed into the loan
  • 15, 20, and 30 year fixed rates available
  • No re-qualification once construction is complete (re-verification of employment is required prior to converting to permanent financing)
  • A single closing reduces closing costs, saving you money!
Conventional One Time Close Construction Loan

What are the Benefits of OTC Construction Loan?

Single Closing = Saves Time & Money

The Conventional OTC Construction Loan is designed to simplify your mortgage process by giving you only one closing date rather than two. You can secure purchase of the land and the construction of the home as well as the permanent loan all in a single closing.

Reduces the Risk to the Borrower

The OTC means the borrower doesn’t have to qualify twice as in a traditional two time close construction loan. Once the construction phase is complete, the borrowers do not have to re-qualify for a permanent mortgage since the permanent loan is closed before construction begins.

Low Down Payment Options

The Conventional One Time Close Construction Loan’s maximum loan to value (LTV) ratio is 95% for borrowers who will live in the property as their primary residence. So you only need a minimum of 5% down and the closing costs can be financed into the loan so you truly only have to come out of pocket for the 5%.

Fixed Interest Rates

Since the permanent mortgage is closed before construction begins, the fixed rates on Conventional OTC loans will not be subject to change during the construction phase.

Single Appraisal Requirement

The OTC construction loan only requires one appraisal done prior to closing on the loan. A two time close construction loan requires two appraisals to be done and both are required to be paid by the borrower.

Who Can Qualify for a Conventional One Time Close Construction Loan?

The Conventional OTC Construction Loan is available to anybody that meets the minimum qualifying criteria for a Fannie Mae Conventional loan as well as the minimum requirements for a OTC Loan. The basic requirements are as follows:

  • Borrower must be purchasing land at closing or currently owned the land already.
  • Borrower must have a contract with a home builder that is licensed as a general contractor.
  • Must meet the maximum conventional loan amount set by county and state.
  • Amortization of the permanent mortgage loan must begin no later than the first of the month following 60 days from the date of the final inspection or issuance of certificate of occupancy.
  • Minimum 720 Credit Score for each borrower.

How do you Apply for a Conventional OTC Construction Loan?

If you are considering using a OTC construction loan to purchase a new home, then you can apply with the John Thomas Team of Primary Residential Mortgage who are certified in the One Time Close Construction Loans. Our team has the experience to walk you through every step of the process. You will need to select a builder as part of the pre-qualification process as need to have the cost estimate from the builder in order to complete a mortgage per-qualification. You can get started by calling us at 302-703-0727 or you can APPLY ONLINE

What Other Options Do You Have If Can’t Qualify for a Conventional OTC?

If you are not able to qualify for a Conventional OTC loan then you can look into a FHA One Time Close Construction loan. The minimum credit score is much lower to qualify and the debt to income ratio can also be much higher. If you are a Veteran then you can look into the VA One Time Close Construction Loan which offers 0% down. You also don’t have to pay construction interest on the FHA and VA OTC Loans. You can apply for the FHA or VA loan by calling the John Thomas Team at 302-703-0727 or APPLY ONLINE.

About John Thomas

John Thomas and his team are long-time Delaware natives. They know the local real estate market as well as they know the loan products that help them serve it. Dedicated to helping first-time buyers; the John Thomas Team are experts on first-time buyer loan programs (FHA, VA, USDA) and conduct monthly first-time buyer seminars that have been attended by more than 3000 Delaware buyers.