FHA Loans to Buy, Install, or Repair Your Dream Home
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But the USDA’s definition of “rural” is often quite different than you might think. Unlearning the myths about government-backed home loans like the VA or FHA loan programs can help you make more informed decisions about what to buy and where to borrow.
FHA Loans Can Be Used to Build a Home
The FHA One-Time Close construction loan option can help you build your dream home from the ground up. You can even buy land with the loan if you don’t already have a plot of land to build on.
FHA Loans Can Be Used to Install a Home
If you buy manufactured housing, a modular home, or a mobile home with an FHA mortgage, you can use the loan to buy the house itself, the land it is meant to be placed on, and you can have the home delivered from the seller to the land and have it assembled and installed.
You also have the option to rent a lot to place the house on, but the first lease must be long enough to meet FHA requirements. According to HUD.gov, you may need a three-year lease or longer.
FHA Loans Can Be Used to Repair a Home
FHA loan options include the FHA 203(k) rehabilitation mortgage, which can help you buy a fixer-upper and pay for the labor to make the property livable.
You can also use an FHA cash-out refinance to pay for certain upgrades to the home that the FHA 203(k) program might not permit, such as luxury additions like a pool or barbecue pit.
FHA Loans Can Be Used to Take Equity Out of the Home in Cash
Refinancing a home loan with an FHA cash-out refinance loan can help you convert equity into cash, but you’ll need a minimum loan-to-value ratio of 80% or better to get started.
The longer you have owned your home, the more equity may be available, depending on circumstances. That is why new home owners are typically advised not to apply for cash-out loans until they have built more equity.
You can also consider an FHA reverse mortgage for borrowers aged 62 or older who own the home outright or are close to paying off the mortgage. A reverse mortgage features no monthly payments (the loan is declared due in full when the owner dies or stops using the home as their primary residence), and there is cash back to the borrower based on the equity in the home and other factors.
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