Quick Answer
FHA, VA, and USDA one-time close loans all help homebuyers finance both construction and the permanent mortgage in a single closing. VA loans offer the most benefits for eligible veterans, with no down payment or mortgage insurance required, while USDA loans provide zero-down options for rural buyers. FHA loans are best suited for buyers with lower credit scores and a minimum down payment of 3.5%.
What is a one-time close loan?
A one-time close loan—also called a construction-to-permanent loan—finances both the construction phase and the permanent mortgage with a single application and closing.
Instead of obtaining a separate construction loan and then refinancing it into a traditional mortgage, this type of loan streamlines the process and reduces closing costs.
FHA, VA, and USDA all offer government-backed one-time close loan programs. Each has unique eligibility, credit, and down payment requirements, so choosing the right one depends on your personal situation.
Talk to a GO Mortgage expert about which construction loan fits you best.
One-time close loan comparison chart
Use the chart below to compare FHA, VA, and USDA one-time close loans:
| Feature | FHA One-Time Close | VA One-Time Close | USDA One-Time Close |
| Down payment | 3.5% | 0% | 0% |
| Credit score | 620+ | 640–660+ | 640+ |
| Eligible borrowers | All buyers | Veterans & service members | Low-to-moderate income in rural areas |
| Mortgage insurance | Yes (MIP required) | No (Funding fee may apply) | Yes (annual guarantee fee) |
| Income limits | None | None | Yes |
| Location limits | None | None | Must be a USDA-eligible rural area |
| Builder requirements | Approved by FHA guidelines | Must meet VA standards | USDA-approved builder required |
| Closing costs | May be financed | May be financed | May be financed |
| Best for | Buyers with lower credit | Veterans with full entitlement | Rural buyers with limited savings |
FHA one-time close loans: Pros and cons
Pros:
- Low credit score requirement (typically 620+)
- 3.5% down payment for qualified buyers
- Available to any borrower, not limited to military or rural areas
- Gift funds allowed for down payment
Cons:
- Requires mortgage insurance (MIP) for the life of the loan
- Higher upfront and monthly costs than VA or USDA
- Maximum loan limits apply based on the county
An FHA one-time close loan is ideal for first-time homebuyers or those with moderate credit who may not qualify for other programs. It offers more flexible approval standards but comes with long-term mortgage insurance costs.
VA one-time close loans: Pros and cons
Pros:
- No down payment required
- No monthly mortgage insurance
- Competitive interest rates
- Backed by the U.S. Department of Veterans Affairs
- May include funding for land purchase and construction
Cons:
- Must be a veteran, active-duty service member, or eligible surviving spouse
- Requires a VA-approved builder
- May include a one-time funding fee (waived for some borrowers)
VA one-time close loans are the most cost-effective choice for qualified military borrowers. With no down payment and no MIP, veterans can build a home with minimal upfront cost and long-term savings.
USDA one-time close loans: Pros and cons
Pros:
- Zero down payment
- Lower mortgage insurance costs compared to FHA
- Designed for low- to moderate-income rural buyers
- Can finance land and construction in one loan
Cons:
- Property must be in a USDA-eligible rural area
- Income limits apply based on household size and location
- Builder and plan approval processes may be stricter
USDA construction loans are ideal for families seeking to build a home in eligible rural areas and who meet the income limits. The zero-down feature makes it highly accessible, but the location and income restrictions limit eligibility.
How to choose the right one-time close loan
Consider the following factors when deciding between FHA, VA, and USDA options:
- Are you a veteran or currently serving in the military? VA is likely the best option
- Do you plan to build in a rural area and have a moderate income? USDA may be ideal
- Is your credit less than perfect, and you’re not eligible for a VA or USDA loan? FHA is a strong fallback
Also think about:
- Do you have cash saved for a down payment?
- Do you want to avoid long-term mortgage insurance?
- Are you building on your own land or buying both land and a house package?
Each loan program has unique strengths that can match different borrower profiles.
Builder and property requirements for government-backed one-time close loans
In addition to borrower qualifications, FHA, VA, and USDA one-time close loans require that your builder and construction project meet specific criteria. These requirements ensure the property meets safety, quality, and valuation standards before, during, and after construction.
Builder requirements
All three loan programs require that your builder:
- Be licensed and insured in the state where the home is being built
- Have prior experience in residential construction
- Provide a detailed construction contract
- Be approved by the loan program (FHA, VA, or USDA)
- Meet deadlines and follow the drawing schedule protocols
Lenders may request a builder’s resume, references, and a list of recently completed projects. Approval timelines for builders vary, so it’s best to begin this step early in the process.
Property requirements
Each program also sets guidelines for the property type, location, and appraised value:
- FHA: The home must be a primary residence and meet HUD’s minimum property standards
- VA: The property must be owner-occupied and pass a VA appraisal and inspection
- USDA: The home must be in a USDA-eligible rural area and comply with USDA design guidelines
Multi-unit properties may be allowed, depending on the program (e.g., FHA permits 2- to 4-unit homes with higher down payments). Manufactured or modular homes may be eligible but often require additional review and approval.
Understanding these builder and property standards is crucial to avoiding delays or disqualification during underwriting.
FAQ: FHA vs VA vs USDA one-time close loans
Q: Which is the best one-time close loan if I have no down payment?
A: VA and USDA both offer zero-down payment, one-time close construction loans. FHA requires a 3.5% down payment.
Q: Can I use gift funds with any of these loan types?
A: Yes. FHA and VA allow gift funds for closing costs and down payments. USDA has more restrictions, but may permit gift funds in some cases.
Q: Do all of these loans cover land and construction?
A: Yes. All three programs allow you to finance land, construction, and the permanent mortgage in one transaction.
Q: Can I use these loans if I already own the land?
A: Yes. If you own the land, the value may count as equity toward your down payment, especially with FHA and USDA loans.
Find the best loan for your home build
FHA, VA, and USDA one-time close loans each offer unique benefits depending on your background, income, and location.
Whether you’re building your first home in a rural area or you’re a veteran ready to start fresh, there’s a program designed to fit your needs.
Let GO Mortgage help you choose the best construction loan for your situation.