Build, Buy, or Rent a Home in 2024?
But what option is best for you when finding a new place to live? We examine some important issues below.
Renting a Home
Renting in 2024 may be an option to think about if you’re still in the planning stages of buying or building a new home. It takes longer than you might expect to get fully ready for a mortgage, and if you are just now exploring your credit, lender options, and saving up for the down payment.
But some market watchers believe rental inventory may be lower this year, and there could be more competition for rental properties overall.
Those ready to house hunt won’t have the same issues in this area as those who are less prepared to commit. But either way, expect renting to be a different proposition this year (potentially) than last year.
Buying Existing Construction
This option is for any financially qualified borrower, especially those needing a more forgiving loan program than a conventional mortgage.
Buying existing construction using an FHA mortgage requires a minimum 3.5% down payment. FICO scores that fall within the FHA and the lender’s range (580 or higher for the lowest down payment according to FHA guidelines), and the borrower is permitted to use down payment assistance.
Down payment help, though not offered directly through the FHA, can help. State and local programs may offer you the ability to apply for a loan with down payment grants, forgivable loans, or other options.
That’s not necessarily true when applying for a construction loan, even if it is an FHA loan, and that’s due to lender requirements, as we’ll see below.
Build a Home on Your Own Lot
FHA One-Time Close construction loans allow you to build a home on your own land or on land you buy in connection with the loan. These loans have the same FHA requirements as other loan programs (condo loans, manufactured home loans, FHA 203(b) loans for existing construction).
But these loans differ due to lender requirements. You may be asked to put 20% down, you may be asked to have higher FICO scores than typical FHA loans for existing homes, and you are not allowed to use down payment assistance.
Construction loans are worth the effort and cost but require more from the borrower. Ask a participating lender to explain the cost differences and timelines of a construction loan compared to an FHA purchase loan to understand whether this option is right for you.
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