FHA Construction Loans in 2019: A Borrower's Market?
Why? Increases in home inventory, slashed prices on new construction homes, and other factors are partly responsible according to several published reports including data from Zillow.com.
Some sources point to a lower demand in recent times and higher interest rates contributing to an environment that saw the last quarter of 2018 go out with home price reductions on new construction as many as 25% of the available houses in the market’s “inventory”.
Price cuts on new homes don’t automatically translate into lower construction costs for One-Time Close mortgages, but it’s a comparison worth making depending on your housing market.
Major housing markets including Dallas, Seattle, and San Francisco saw new construction home price cuts in the 30% range. That’s 30% of the housing market inventory, not 30% off the price of the home. Any price reduction is a good one, especially when it applies to a big selection of the available homes in a given market.
But that might not be enough to lure some house hunters or first-time home buyers away from the One-Time Close construction loan-these borrowers place a higher priority on having the home built to their specifications. And an FHA mortgage loan can let you do that even as a first time borrower.
Even in a housing market where price cuts aren’t as widespread or as steep as some, the FHA construction loan or new purchase loan can be a big advantage for those who have not purchased a house before.
A first time house hunter and loan applicant will appreciate the comparatively lower 3.5% down payment requirement for qualified borrowers AND the ability to get family or friends to help with the down payment.
And a recent Fed announcement that interest rates would not be hiked at this time could add a twist to the home loan environment in general. When the Fed made its’ announcement on Wednesday, January 30, 2019, rates fell to three-week lows. Whether that trend persists or not remains to be seen, but it does make for an interesting environment to purchase your first home in.
Talk to an FHA lender today about a construction loan or a new construction purchase. You will be glad to know your options in this area should you choose to start your journey to home ownership soon.
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We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs. We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products. We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially.
FHA.com provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service. We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.
Please note that investor guidelines for the FHA, VA, and USDA One-Time Close Construction Program only allow
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- Send your first and last name, e-mail address, and contact telephone number.
- Tell us the city and state of the proposed property.
- Tell us your and/or the Co-borrower’s credit profile: Excellent – (680+), Good - (640-679), Fair – (620-639) or Poor- (Below 620). 620 is the minimum qualifying credit score for this product.
- Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio per VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $750,000 and review higher loan amounts on a case by case basis. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
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