Quick Answer
The required down payment for a one-time close construction loan depends on the loan program. FHA loans require as little as 3.5% down, while VA and USDA loans allow zero down payment for qualified borrowers. Conventional options typically require a down payment of 5% to 20%, depending on credit and lender criteria.
What is a one-time close construction loan?
A one-time close construction loan is a type of mortgage that combines financing for building a home with permanent mortgage repayment into a single loan, with a single closing. This structure simplifies the process for homebuyers by eliminating the need for two separate loans and reducing overall closing costs.
These loans are also known as construction-to-permanent loans, and they lock in your mortgage terms upfront—before the home is built. They’re ideal for buyers ready to work with a licensed builder and break ground on a custom or semi-custom home.
Apply today with a lender that understands construction loans.
What is the typical down payment for a one-time close construction loan?
The down payment amount varies significantly by loan program. Here’s a breakdown of common one-time close loan options and their typical down payment requirements:
| Loan Type | Minimum Down Payment | Key Notes |
| FHA One-Time Close | 3.5% | Credit scores 620+; flexible for first-time buyers |
| VA One-Time Close | 0% | For eligible veterans and active-duty service members |
| USDA One-Time Close | 0% | For qualified rural borrowers; income and location limits apply |
| Conventional Loan | 5%–20% | Based on credit score, LTV, and lender guidelines |
Down payment funds must be documented and sourced—often from savings, retirement accounts, or approved gift funds. Each program has specific rules for acceptable sources of the down payment.
Are there zero-down options?
Yes. Two federal programs offer no down payment construction-to-permanent loans:
- VA One-Time Close Construction Loans: Available to eligible veterans, service members, and some surviving spouses. These loans offer 100% financing with no mortgage insurance and no down payment required.
- USDA One-Time Close Construction Loans: Designed for rural homebuyers who meet income and location eligibility. USDA loans also provide 100% financing and no down payment.
To qualify for a zero-down, one-time close construction loan, you must:
- Meet VA or USDA eligibility guidelines
- Choose an approved builder
- Ensure the property is within program-compliant areas
What about FHA and conventional loan requirements?
FHA One-Time Close Construction Loans
FHA construction loans require a minimum down payment of 3.5%, making them an attractive option for first-time homebuyers and borrowers with limited savings. To qualify for this low down payment, you must have:
- A credit score of 620 or higher
- A debt-to-income ratio (DTI) below 50%
- Stable income and employment history
FHA one-time close loans allow for gift funds to cover the full down payment, provided the gift comes from an eligible donor, such as a family member.
Conventional One-Time Close Loans
Conventional construction-to-permanent loans typically require between 5% and 20% down, depending on your credit profile and the lender’s guidelines. Unlike FHA or VA loans, conventional options are not government-backed, which means:
- Higher down payments are common
- PMI (private mortgage insurance) applies if LTV exceeds 80%
- Stronger credit (typically 680+) is expected
What affects your required down payment?
Several factors influence how much money you’ll need upfront:
- Loan type: FHA, VA, USDA, and conventional all have different requirements
- Credit score: Lower scores may trigger higher down payment requirements or limit program eligibility
- Appraised value: If the appraised value is lower than the construction cost, you may need to cover the gap
- Builder terms: Some builders require a deposit or cost overrun reserves upfront
- Gift funds: Not all programs accept down payment assistance or gifts
- Lot ownership: If you already own the lot, its value may be used as equity toward your down payment
Your lender will calculate the loan-to-value (LTV) ratio, which compares the loan amount to the property value. Lower LTVs generally reduce risk and may result in better loan terms.
What other upfront costs should you expect?
In addition to the down payment, be prepared for:
- Closing costs (typically 2–5% of the loan amount)
- Builder deposit or construction contingency reserves
- Interest reserve for covering payments during the build
- Permit and inspection fees
- Title, appraisal, and recording fees
These costs may be financed into the loan or paid out of pocket, depending on the program and loan amount.
Can down payment assistance be used?
Some programs allow down payment assistance (DPA) through:
- State housing finance agencies (HFAs)
- Employer assistance programs
- Nonprofit grants or forgivable second mortgages
However, DPA availability depends on the loan program and lender participation. FHA loans generally allow it, while VA and USDA don’t require it but may restrict external assistance.
Check with your lender about current DPA options compatible with one-time close construction loans.
When is the down payment due?
In a one-time close construction loan, your down payment is typically due at closing—before construction begins.
This differs from traditional construction loans, where funds are typically disbursed in stages.
Because it’s a single closing, all funds must be verified and available before the loan can be finalized.
FAQ: Down payment for a one-time close construction loan
Q: Can I build a home with no down payment?
A: Yes, if you qualify for a VA or USDA one-time close construction loan, you may not need any down payment.
Q: What’s the down payment for an FHA one-time close loan?
A: FHA loans require a minimum of 3.5% down, assuming you meet credit and income guidelines.
Q: Do I need a higher down payment for a custom home?
A: Possibly. If your design exceeds local appraisal benchmarks, the lender may ask you to cover the difference between the appraised value and construction costs.
Q: Can gift funds be used for a down payment?
A: Yes, FHA and conventional one-time close loans often allow gift funds. VA and USDA don’t require a down payment at all.
Start building your dream home with the right loan
Your down payment requirement for a one-time close construction loan depends on the program you choose and your financial profile.
Whether you’re eligible for a zero-down VA or USDA loan, or preparing for a 3.5% FHA investment, understanding these details helps you plan and build with confidence.
Start your construction journey today by exploring your options with GO Mortgage.