FHA Construction Loan Down Payments

October 7, 2022

FHA One-Time Close construction loans are a bit different than other FHA home loan options. These loans have some unique requirements and typically those are associated with lender requirements and not FHA loan rules.

Participating FHA lenders often have higher credit score requirements and additional down payment guidelines you will need to know going into the process.

FHA loan rules on paper say One-Time Close loans are just the same as their other loan products in terms of having a minimum down payment requirement of 3.5%, having a FICO score range for the lowest down payment starting at 580 or better, and there is mortgage insurance required for the loan.

Lender standards above and beyond these minimums are common. For FHA construction loans you may find lenders requiring FICO scores in the mid-600 range for loan approval.

While you may still be able to make a lower down payment than you would for a conventional construction loan option, having the ability to make a larger down payment can work in your favor when it comes to loan approval.

FHA loan rules and lender standards both address the issue of the down payment where sourcing is concerned; lenders typically require you to provide information about the sources of your down payment.

Wherever your down payment money came from,  the lender will need to see proof of that in writing. Down payment rules for FHA One-Time Close construction loans say down payments cannot come from a credit card cash advance, from pink slip loans, payday loans, etc. And no third party with a financial stake in the outcome of the transaction can offer assistance with down payments on an FHA mortgage.

But for FHA construction loans, this should not be an issue for the simple reason that your lender may choose NOT to approve a construction loan that requires down payment assistance.

Construction loans trend toward being more expensive than existing construction loans. Your lender’s job includes having to determine whether you can realistically afford the loan. For construction loans, down payment assistance may look like a red flag to a loan officer.

FHA construction loans have the same low down payment requirement as its other loans for purchasing condo units, suburban homes, manufactured housing, etc. A 3.5% minimum is far lower than you might expect from a conventional construction loan option.

Putting the minimum down can help you save money up front on the loan, but paying more up front on your down payment can make your loan less expensive over the lifetime of the mortgage. If you are building your own home, it pays to do the math to see how putting more down could affect the cost of your mortgage over the long term.


 FHA, VA, and USDA: One-Time Close Loans


Want More Information About One-Time Close Loans?

We have done extensive research on the FHA (Federal Housing Administration) and the VA (Department of Veterans Affairs) 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 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 and VA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs, including but not limited to: Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes, Dome Homes, Bermed Earth Sheltered Homes, Tiny Homes, Accessory Dwelling Units, or A-Framed Homes.

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Please send your email request to [email protected] which authorizes FHA.com to share your personal information with one mortgage lender licensed in your area to contact you.

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 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.

4. 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 $1,000,000 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.