Comparing FHA Lenders
And what about issues like how your lender typically handles the delayed mortgage payments you may experience after your construction loan closes but the construction itself hasn’t finished yet?
You may not have to start paying your mortgage until the job is fully done but you will be required to pay the loan off within the original loan term. Ask each lender how this scenario is handled if you’re shopping around for an FHA construction loan.
Compare Preferred Lenders
Some contractors may try to get you to use their preferred lender. This may be true for a construction loan, but if you are doing early research into an FHA 203(k) Rehabilitation Loan you may encounter this as well.
Collect the names of these preferred lenders and compare them all one to another, as well as to some who were not suggested to you. Some situations may have you choosing to work with the suggested lender, but in other cases, you may be well-served by comparing more options.
Down Payment Issues
One thing you should not bother doing when researching your FHA loan? Looking for a lower down payment. If you qualify for the FHA’s low 3.5% minimum down payment you won’t find a lender willing to offer you a lower number.
What you MAY find instead are lenders who have or can refer you to first-time homebuyer programs that allow you to apply for down payment assistance assuming you meet the requirements.
And don’t assume that “first-time buyer” means you have never owned property before; typically these programs recognize those who have not owned a primary residence in the last three years to be first-time buyers.
What to Know About Down Payment Assistance
Some FHA loans don’t permit down payment help--more specifically the participating lender does not allow down payment assistance. This is often true of FHA One-Time Close Construction Loans. It’s also common for any other type of construction loan for primary residences. You generally won’t be allowed to use down payment help on such a loan.
Finally, the type of home loan you seek may not always be the best kind for the purchase you want to make. You won’t use a construction loan to do repairs or renovations; the FHA Rehab Loan program is what that is used to accomplish.
FHA loans are not one-size-fits-all; there are condo loans, manufactured housing loans, FHA loans to purchase a typical suburban home, and even FHA loans to repair or rebuild a home affected by a disaster in a federally-declared disaster area.
Reverse Mortgages Are Ideal for Senior Borrowers
The Pros and Cons of Subprime Mortgages
A Streamline Refinance Simplifies the FHA Loan Process
Do you know what's on your credit report?
Learn what your score means.