Factors to Anticipate Before You Renovate or Build a Home
July 10, 2023
If you want to build a house from the ground up using an FHA One-Time Close mortgage or renovate a home using an FHA 203(k) Rehabilitation Mortgage, there are some important questions to answer about the nature of your loan and how to best prepare for it.
Some of these issues aren’t limited to one type of loan or another; lender standards may play a factor in some cases, and program guidelines for loan products like the FHA 203(k) Rehabilitation Loan may apply in other cases.
Project Size and Scope
Some borrowers want to build a multi-unit property from the ground up. FHA loan rules for its single-close construction loan program allow a borrower to apply for a loan to build a property as large as up to four living units.
Does your One-Time Close lender allow a residential build larger than a single unit? Chances are good that you may not be allowed to do so based on lender requirements (not FHA loan rules), but every lender is different.
Ask about this factor early when building or renovating a multi-unit property. Be sure to ask every FHA lender you compare about this issue for best results.
In a similar fashion, there are limits on the FHA 203(k) Rehab loan. There is a standard 203(k) and a Limited FHA 203(k) Rehabilitation mortgage.
With a Limited version of the 203(k) you can’t work on load-bearing walls or do other types of major rehab work allowed with a Standard 203(k). Know the size and scope of the work you need to be done as early as possible and make your FHA loan choices accordingly.
What’s Included in Your Project Budget?
Sometimes, the builder or contractor's budget won’t cover things you might otherwise assume are part of the project.
Are you building a home on your own lot? Unless your builder specifically commits in writing to providing landscaping, this is a factor you may have to pay for outside the builder’s budget for the project.
Renovations can work in a similar way; if you have specific goals for remodeling or renovating your home, make sure those are listed in your contract specifically.
Otherwise, like home insurance, it may not be offered or covered. Get it in writing! A verbal promise may not be enough if a dispute arises from a perceived omission or oversight.
Homeowners’ Association Rules and Bylaws
This issue is more closely associated with construction loans, but if you renovate a property using an FHA 203(k) loan, you may wish to review your covenants to see if any of your plans are addressed in them.
For those who want to build a home in a residential area subject to a Homeowner’s Association agreement, be sure to learn the specifics of the HOA so you don’t run afoul of any cosmetic issues, design requirements, etc.
Does your new HOA specify a certain look or a specific type of landscaping? Know before you commit funds to the project.
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.
Contact Us: Send Us Your Request – Spam Safe
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.
Some of these issues aren’t limited to one type of loan or another; lender standards may play a factor in some cases, and program guidelines for loan products like the FHA 203(k) Rehabilitation Loan may apply in other cases.
Project Size and Scope
Some borrowers want to build a multi-unit property from the ground up. FHA loan rules for its single-close construction loan program allow a borrower to apply for a loan to build a property as large as up to four living units.
Does your One-Time Close lender allow a residential build larger than a single unit? Chances are good that you may not be allowed to do so based on lender requirements (not FHA loan rules), but every lender is different.
Ask about this factor early when building or renovating a multi-unit property. Be sure to ask every FHA lender you compare about this issue for best results.
In a similar fashion, there are limits on the FHA 203(k) Rehab loan. There is a standard 203(k) and a Limited FHA 203(k) Rehabilitation mortgage.
With a Limited version of the 203(k) you can’t work on load-bearing walls or do other types of major rehab work allowed with a Standard 203(k). Know the size and scope of the work you need to be done as early as possible and make your FHA loan choices accordingly.
What’s Included in Your Project Budget?
Sometimes, the builder or contractor's budget won’t cover things you might otherwise assume are part of the project.
Are you building a home on your own lot? Unless your builder specifically commits in writing to providing landscaping, this is a factor you may have to pay for outside the builder’s budget for the project.
Renovations can work in a similar way; if you have specific goals for remodeling or renovating your home, make sure those are listed in your contract specifically.
Otherwise, like home insurance, it may not be offered or covered. Get it in writing! A verbal promise may not be enough if a dispute arises from a perceived omission or oversight.
Homeowners’ Association Rules and Bylaws
This issue is more closely associated with construction loans, but if you renovate a property using an FHA 203(k) loan, you may wish to review your covenants to see if any of your plans are addressed in them.
For those who want to build a home in a residential area subject to a Homeowner’s Association agreement, be sure to learn the specifics of the HOA so you don’t run afoul of any cosmetic issues, design requirements, etc.
Does your new HOA specify a certain look or a specific type of landscaping? Know before you commit funds to the project.
FHA, VA, and USDA: One-Time Close LoansWant 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.
Contact Us: Send Us Your Request – Spam Safe
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.
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