Anticipating FHA Loan Costs When Building a Home
If you use an FHA One-Time Close construction loan to build a house from the ground up and don’t have already have a plot of land, you’ll need to purchase the land in conjunction with the construction loan. It’s an expense that may push up the cost of the loan, but a necessary one.
Are you buying a home with an FHA 203(k) Rehabilitation Mortgage? In some cases, there may be outbuildings or other structures that need to be torn down.
If demolition, disposal, and/or removal of such structures is needed, that’s an expense to anticipate when saving for your mortgage. Will you need permits of any kind to get that work done? There is another expense worth saving for in advance.
Permits and Fees
No matter what kind of project you are paying for with an FHA mortgage, if you build, renovate, or remodel, it’s likely that you’ll need to save for permits and local fees. In the same way as demolishing a structure may require certain permits, building or modifying one requires them, too.
If you build, remodel, or renovate, you may be required to submit to a code compliance inspection after the work is done. This is NOT the same as an appraisal and you may need to save for both the inspections and the appraisal, so it’s best to start early.
Believe it or not, this is a serious issue for some. If your home is uninhabitable until FHA 203(k) Rehab loan work is complete or the One-Time Close construction work is finished, you’ll need to budget extra cash for living away from the home.
A temporary rental, a more permanent lease, or an arrangement with friends and family may be needed between closing the loan and accepting the keys.
A construction loan could take between six and 24 months to complete the work, so it’s best to expect to pay rent a while longer than you anticipate in your initial budgeting. You may need to learn how much it will cost to break a lease in advance so you can save for that expense if needed, too.
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.
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