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Why does your chosen lender make a big difference when it comes to how your FHA One Time Close construction loan or any other type of mortgage product make such a difference? Can’t you apply at any participating FHA lender to get what you need?

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FHA Construction Loans: Why Your Lender Matters

FHA Construction Loans: Why Your Lender Matters
April 24, 2018 - Why does your chosen lender make a big difference when it comes to how your FHA One Time Close construction loan or any other type of mortgage product make such a difference? Can’t you apply at any participating FHA lender to get what you need?

The answer isn’t as simple as yes or no, and the reasons for that have a lot to do with your participating lender and their standards and requirements.

FHA loan rules governing home loans and how they can be used may be found in HUD 4000.1, the FHA Single Family Home Loan Handbook. There are provisions for FHA forward mortgages such as the One Time Close Construction loan, as well as mortgages for existing construction.

There are also FHA condo loans, mobile home loans, rehab mortgages, and loans for disaster victims to repair or replace property damaged in federally declared disaster areas.

But not all participating FHA lenders offer all FHA loan products. It’s up to the lender to decide which products to offer and what standards to approve loans are. One reason why choosing your lender carefully is so important?

Lender standards for loan approval are not identical; depending on where you go, higher FICO scores may be required, there may be escrow issues, or you may need to get a flood zone determination for your new home.

Some lenders won’t allow FHA mobile home loans. In other housing markets FHA condo loans may not be offered. Some of this may be a simple supply-and-demand equation; in a housing market dominated by suburban homes, the condo mortgage question may rarely get asked.

In a housing market with few or no mobile homes, the FHA mobile home loan may not be offered. And in some cases, the lender may simply decide that a certain kind of mortgage simply isn’t in that company’s interests.

Shopping around for the right lender may be just as important as shopping for the home itself. You’ll need to know the lender can issue the kind of loan you need, and what the lender’s procedures are for that type of mortgage.

For FHA construction loans, your lender should tell you about requirements for down payments, escrow, completion times, applicable FICO score ranges for construction loans, and what to generally expect from a loan process that can certainly differ from buying an existing construction home the borrower moves into right away after closing time.

Some lenders may not allow more than 1 unit stick-built homes with their FHA construction loans, others may allow up to four units, permit modular or manufactured housing, etc. You will need to discuss those requirements with a loan officer to see what is possible in that housing market.

Learn More About FHA One-Time Close Construction Loans

We have done extensive research on FHA One-Time Close mortgages and spoke directly to the licensed lenders for most states. These are qualified mortgage loan officers who work for lenders that know the product well. 

Each company has supplied us the guidelines for their product. If you are interested in being contacted by one licensed lender in your area, please respond to the below questions to save time. All information is treated confidentially.

Your response to onetimeclose@fha.com authorizes FHA.com to share your personal information with a licensed mortgage lender in your area to contact you.

Please note that the FHA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes).

1. Send your first and last name, e-mail address, and contact telephone number.

2. Tell us the city and state of the proposed property.

3. Tell us your credit score and/or the Co-borrower’s credit score, if known. 620 is the minimum qualifying credit score for this product.

4. Are you or your spouse (Co-borrower) eligible veterans?

5. If either of you are eligible veteran’s, the down payment is $0 up to the maximum VA lending limit for your county. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.

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