Fannie Mae Single Close Construction Loans
Building your new home becomes simple with the right lender. Avoid challenging expenses and timelines by securing financing that will make building a home achievable and affordable.
A Fannie Mae single close construction loan puts building a single-family home within your reach, offering down payment options and simplified financing.
Purchase land or build on property you already own with a single loan for both the construction and long-term mortgage of your new home.
What is a Fannie Mae Single Close Construction Loan?
The Fannie Mae single close construction loan is a popular option for building new single-family homes. It offers financing that is easier to qualify for and an overall process that makes paying for and building your home simpler to manage.
With a Fannie Mae single close construction loan, you can finance the purchase of your lot, the construction of your new home, and the long-term mortgage that will be needed to afford your home once it’s built.
This streamlines the process, allowing you to close on your home loan once, rather than having to secure two or more separate loans for each stage of the process.
You qualify once and have a single appraisal, loan originator, and closing process. This reduces the time it takes to build and move into your new home, protects you from unforeseen circumstances down the road, and saves you from paying double or triple the closing costs.
Fannie Mae single close construction loans are insured by the Federal National Mortgage Association, commonly known as Fannie Mae, which is a government-sponsored enterprise established to provide a reliable source of affordable mortgage financing.
Because these loans are backed by Fannie Mae, interest rates are kept competitively low and borrowers can make a minimum down payment as low as 5%.
Fannie Mae allows borrowers to lock in interest rates prior to closing, while also allowing them to adjust to the lowest interest rate available during the construction process when converting to a long-term mortgage.
Home construction is complicated and requires many moving parts. Single close construction loans are made to help simplify the process.
How to Get a Fannie Mae Single Close Construction Loan
If you’d like to see whether you qualify for a Fannie Mae single close construction loan, connect with us. To get you started, we’ve outlined the steps and qualifications needed to help you understand the process.
The Financing Process
By sharing basic information about the home you want to build, we’ll work with you to see if a Fannie Mae single close construction loan meets your needs and whether you can get pre-approved for the loan.
Next, we’ll begin a more in-depth underwriting process to review your income, credit, ability to repay the loan, and other eligibility requirements. This will include demonstrating proof that you either currently own or will purchase a lot on which your property will be built.
We’ll also work with you and your Fannie Mae-approved builder to determine what the cost and timeline will be to build your home and finance it. We’re with you through each step, leading to a simple and efficient closing so that you can move forward with building your home.
Once the loan closes, you’ll begin construction on your new home within 30 days of the closing date. Your construction team will provide you with regular updates on the progress of your home. We’ll manage the construction phase, including ordering draw inspections, any state-required surveys and inspections, and Fannie Mae requirements.
Loan Requirements to Meet
These are some of the standard requirements often needed to qualify for a Fannie Mae single close construction loan. If you have questions about these requirements, we’re here to help.
- You need to purchase the land you will build on at closing (or currently own the land).
- The home you want to build needs to be an eligible site-built single-family, modular, or manufactured home.
- In most cases, it’s best to have a credit score of 680 or higher.
- Fannie Mae and the lender must approve contractors that will be used.
- An appraisal will need to be done to assess the value of the project.
- The transaction from construction to a permanent home and loan may not exceed 12 months.
- You need to use your own funds to make the minimum borrower contribution. Exceptions include having a Loan-To-Value (LTV) or Combined Loan-To-Value (CLTV) ratio of less than or equal to 80%. Or if you purchase a one-unit principal residence, you may be eligible to use gifts, donated grant funds, or funds received from an employer to pay for some or all of your minimum contribution.
Fannie Mae Single Close Construction Loan FAQs
Financing the build and long-term mortgage of your new home is an important step in beginning this process. It’s ok to have questions. We’ve compiled answers to the frequently asked ones, but don’t hesitate to ask more.
Because Fannie Mae single close construction loans are insured, their interest rates are kept competitively low. You may also be able to lower your interest rate for your long-term mortgage if rates drop during the construction phase.
Interest rates for all single close construction loans vary based on a variety of factors including your income and finances, credit score, the location where you want to build, and loan amount.
To know what interest rate your situation would qualify for, get in touch with one of our loan advisors for more specific information.
There are closing costs associated with processing any loan, and the costs of a single close construction loan are comparable to standard mortgages. They include costs for the lender to service the loan, as well as an appraisal and other fees.
With a single close loan, you only pay closing costs once and your closing package includes a single promissory note and one deed.
This is a unique benefit that many other financing options for home building don’t offer. With other loan types, borrowers often need two or more loans to finance the actual build and their long-term mortgage, meaning they pay closing costs for each of those loans.
Fannie Mae single close construction loans apply to a wide range of property types. When you connect with us, we’ll discuss whether your property and build type will qualify.
These loans are well suited for newly constructed single-family homes. Whether you’re tearing down an old house, building new on a vacant lot, or buying a manufactured home, Fannie Mae loans can help.
If you’re purchasing a one-unit primary residence, you may also be eligible to use gifts, donated grant funds, or funds received from an employer to pay for some or all of the borrower minimum contribution that is required to secure a Fannie Mae single close construction loan.
A Fannie Mae single close construction loan is only one of the many options for those who are interested in building their own home.
Some additional options you might want to consider include other specialized construction loans. This includes loan programs for veterans, active-duty military, and spouses through the VA.
A USDA loan might work well for building a home in a rural area. Or there are FHA construction loans that offer low down payment options and competitive interest rates.
We can help you determine what loan program is best for your situation.
We have an in-house single close construction management team. Using our years of experience and home-building expertise, our experts — with support from Fannie Mae — will review and approve documentation from every stage of construction.
This includes project budget and timeline, planning and specifications, permits and inspection, and building code best practices.
At the start, you’ll want to find and engage a general contractor to build your home. Our builder vetting process ensures that all builders accepted into our program have a sterling record of on-time completion for their home projects. Quality, safety, and efficiency are top priorities.
Our team will help keep your project on track every step of the way. This allows potential problems to be dealt with before they can turn into major delays.
Our completely hands-free building process means you never need to worry about applying for building permits or arranging inspections as your construction takes shape. It is all handled for you. The documentation you might need in the future is centralized all in one place.