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FHA home loans are not just to buy or refinance existing homes. You can use an FHA One-Time Close Construction Mortgage to build on your own lot and you can be a first-time home buyer and still qualify for the loan.

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December 6, 2019
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FHA.com is a privately owned website, is not a government agency, and does not make loans.

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Facts You Need to Know About FHA Construction Loans

November 22, 2019 - FHA home loans are not just to buy or refinance existing homes. You can use an FHA One-Time Close Construction Mortgage to build on your own lot and you can be a first-time home buyer and still qualify for the loan.

Facts about FHA Construction loans you should know include the ability to build on your own land or purchase land to build upon; if you are going to build on land you already own it should be owned for no longer than six months.

The “six month rule” trips some borrowers up because they are not sure when the six month time period begins. FHA loan rules say the land must be owned for no longer than six months at the time the FHA loan case number is assigned.

FHA loan rules for Construction Loans also include the same requirement for an Up-Front Mortgage Insurance Premium (UFMIP) as for existing construction homes.

If you want an FHA One-Time Close loan to build on your lot (with a low 3.5% interest rate for qualified borrowers--see below) you will have to pay up front (as part of closing costs) or finance the UFMIP in its’ entirety.

FHA loan FICO score requirements are no different for construction loans than for any other FHA mortgage. But your lender may have different standards.

Some participating FHA lenders want a slightly higher credit score range to qualify for a construction loan. But in general terms, both the down payment requirement and the FICO score rules are identical (in the FHA loan rulebook, not your lender’s).

Borrowers should know that construction loan rules in the FHA handbook say the borrower can act as the general contractor, but you will find lenders can be reluctant to agree to this. It’s best to assume you will be required to hire a licensed contractor.

It’s also important to know that for construction loans, FHA loan rules do not permit cash back to the borrower in excess of $500 except in the form of a refund for something paid up front that is later included in the loan amount.

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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