Home Buying and Building Options With FHA Mortgages
October 16, 2023
With an FHA mortgage, your low down payment options include 3.5% of the price of the home if your FICO scores are 580 or higher (FHA loan program rules, not lender standards), and you get this loan with no early payoff penalty should you choose to refinance later to get a better interest rate.
What some don’t realize about FHA mortgages? There’s a lot of flexibility in the type of property you can buy or build. The choice to buy or build is a good place to begin.
Build or Buy?
With an FHA loan, you can purchase someone else’s home, or build a brand-new house from the ground up. The same low FHA-required down payment applies no matter which option you choose. There are pros and cons for each option, do you know what they are?
Buying Existing Construction With an FHA Mortgage
What is the upside of buying someone else’s house with an FHA mortgage? You can buy and occupy the house much faster than you could move into a home that needs to be built first. You can also negotiate with the seller to get some of your closing costs paid for in what’s known as a seller concession. You can’t do that with a construction loan.
Building Your Own Home With an FHA One-Time Close Construction Loan
The upside to building instead of buying?
Yes, you do have to wait before enjoying your new home, but you do not have to compete with other borrowers to get the perfect house. You can specify the home’s design and features yourself with a One-Time Close loan.
FHA loans don’t require a higher down payment to build instead of buy. This is an important aspect of the process since some may agonize over whether to make a larger down payment or not.
As long as the lender accepts the 3.5% FHA loan minimum down payment, you won’t have to worry about paying more in that department. Be sure to ask what lender standards are for the down payment and the FHA minimums.
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 will allow per VA guidelines. While there are no maximum loan amounts, most lenders will go up to $1,500,000 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.
What Both Loans May Require
Both existing purchase and single-close construction loans require an appraisal, a credit check, a title search, compliance inspections where applicable, pest control inspections, hazard insurance where applicable, and flood zone determination where applicable.
Single-close loans typically don’t allow down payment assistance, unlike FHA purchase loans. This is due to lender standards, not FHA requirements, and it’s crucial to ask as early as possible when comparing lenders, as this is a make-or-break issue for some borrowers.
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What some don’t realize about FHA mortgages? There’s a lot of flexibility in the type of property you can buy or build. The choice to buy or build is a good place to begin.
Build or Buy?
With an FHA loan, you can purchase someone else’s home, or build a brand-new house from the ground up. The same low FHA-required down payment applies no matter which option you choose. There are pros and cons for each option, do you know what they are?
Buying Existing Construction With an FHA Mortgage
What is the upside of buying someone else’s house with an FHA mortgage? You can buy and occupy the house much faster than you could move into a home that needs to be built first. You can also negotiate with the seller to get some of your closing costs paid for in what’s known as a seller concession. You can’t do that with a construction loan.
Building Your Own Home With an FHA One-Time Close Construction Loan
The upside to building instead of buying?
Yes, you do have to wait before enjoying your new home, but you do not have to compete with other borrowers to get the perfect house. You can specify the home’s design and features yourself with a One-Time Close loan.
FHA loans don’t require a higher down payment to build instead of buy. This is an important aspect of the process since some may agonize over whether to make a larger down payment or not.
As long as the lender accepts the 3.5% FHA loan minimum down payment, you won’t have to worry about paying more in that department. Be sure to ask what lender standards are for the down payment and the FHA minimums.
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 will allow per VA guidelines. While there are no maximum loan amounts, most lenders will go up to $1,500,000 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.
What Both Loans May Require
Both existing purchase and single-close construction loans require an appraisal, a credit check, a title search, compliance inspections where applicable, pest control inspections, hazard insurance where applicable, and flood zone determination where applicable.
Single-close loans typically don’t allow down payment assistance, unlike FHA purchase loans. This is due to lender standards, not FHA requirements, and it’s crucial to ask as early as possible when comparing lenders, as this is a make-or-break issue for some borrowers.
------------------------------
RELATED VIDEOS:
Show Them You're Serious By Depositing Earnest Money
Homebuyers Benefit From the Work Done by Freddie Mac
Your Second Mortgage Is a Home Equity Loan
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