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If you want to build on your own land using an FHA One-Time Close construction loan, there are some FHA appraisal requirements the property must meet in order to pass the final walk-thru or compliance inspection.

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One-Time Close Construction Loans and Well Water

One-Time Close Construction Loans and Well Water
November 11, 2019 - If you want to build on your own land using an FHA One-Time Close construction loan, there are some FHA appraisal requirements the property must meet in order to pass the final walk-thru or compliance inspection.

Those requirements include directions to be connected with the local water utility, “whenever feasible.” But in some cases, even a new construction home may require the consideration of a well instead of connection to a local utility.

Did you know that for real estate purchases with an FHA loan, there are appraisal requirements set by the FHA which affect existing construction as well as new construction real estate? What follows is NOT an exhaustive list of appraisal rules for wells (including shared wells), since you will also have to check with the local health authority to make sure the well is acceptable.

FHA loan rules do not include a comprehensive listing of all water requirements for state and local jurisdictions, so borrowers and brokers alike may need to contact the local authority to learn what the most current rules are.

FHA appraisal rules never override the local requirements, and it’s good to keep in mind that there are basically two sets of standards (FHA and local requirements) which must be researched.

FHA loan rules for One-Time Close construction loans that include the use or creation of a well include environmental requirements as well as pressure and volume standards for the water delivered. New construction loans require the following where a well is concerned:
 
  • Lead-free pipes;
  • Must meet state or local chemical standards;
  • Must meet state or local bacteriological water standards; 
  • Wells must deliver water flow of five gallons per minute in a minimum four-hour period.

Shared wells, regardless of whether they are associated with a new construction or existing construction property, must meet requirements including:
 
  • Existing wells must deliver water at between three and five gallons per minute;
  • There must be “no exposure” to environmental contamination;
  • There must be a continuous supply of safe, drinkable water;
  • Domestic hot water must be provided;

Water quality must meet local jurisdiction or the EPA standard if no local rules exist.
Talk to your loan officer about any associated requirements with an FHA construction loan that requires the use or installation of a well to learn what local standards may be in effect.

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 [email protected] 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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