How Does FNMA One Time Close Work?

[Anonymous]

We are doing a new build and were told that FNMA does a one time close for new construction.  How does this work? 

We asked our mortgage broker but the explanation made little sense to us. 

Do we close after the house is built?  Or before?  I've googled with little help?

Also, we are using a non-occupant coborrower and one mortgage broker said we needed to use their lot rent as DTI but another said no since it does not report to credit.  Any insight? 

[kc0039]

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@Anonymous wrote:

We are doing a new build and were told that FNMA does a one time close for new construction.  How does this work? 

We asked our mortgage broker but the explanation made little sense to us. 

Do we close after the house is built?  Or before?  I've googled with little help?

Also, we are using a non-occupant coborrower and one mortgage broker said we needed to use their lot rent as DTI but another said no since it does not report to credit.  Any insight? 

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You close after the house is built. Here's what you do for traditional construction loans with a builder. You pay interest only payments to the lender until your new home is done. Then, you refinance the interest only payment loan to a fixed rate loan (new loan) which have your traditional refinance costs which are betwen $2,000 to $3,500 (location dependent).

A one-time close (OTC) construction loan is you build with a builder, then close on the home after building.

Lot rent? Are you renting the lot or is the builder renting the lot?

[Anonymous]

Thank you for the reply!  You put it simply

Our co-borrower has lot rent that they pay monthly.  They will not be living with us (non-occupant).  One mortgage broker said we needed to use the lot rent they pay in the DTI, another one said not to since it is not reported to the credit bureaus. 

[kc0039]

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@Anonymous wrote:

Thank you for the reply!  You put it simply

Our co-borrower has lot rent that they pay monthly.  They will not be living with us (non-occupant).  One mortgage broker said we needed to use the lot rent they pay in the DTI, another one said not to since it is not reported to the credit bureaus. 

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I'll use the lot rent to add to DTI. It's reoccuring monthly, so it needs to be added to the DTI.