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Getting loan to Build House

Simple House Building / May 27, 2022

Generally, when homebuyers have their homes built from the ground up they use construction loans followed by permanent mortgages. Fortunately, a mortgage product called a "construction-to-perm" loan is available that doesn't require two separate loans complete with separate closing costs. While a construction-to-perm loan might seem likely only for more well-to-do homebuyers, the Federal Housing Administration actually does offer its own version. An FHA one-time close mortgage truly allows you to have your home built and financed under one loan.

One-Time Close Mortgages

FHA's one-time close mortgage is offered by banks approved to lend using FHA-insured mortgages. Additionally, an FHA one-time close mortgage can be used for traditional site-built as well as manufactured or modular homes, including their lot purchases. Each FHA-approved one-time close lender, though, decides just what home types it will include in one-time close financing. For instance, some lenders only offer FHA one-time close mortgages for modular or manufactured homes while others also offer them for site-built homes.

FHA Lending Guidelines

Most of the traditional FHA lending guidelines applying to mortgages for existing homes apply to one-time close home loans. For example, low down payments of 3.5 percent and FHA's relaxed credit qualification usually apply to one-time close mortgages. Also, only one closing occurs when using an FHA construction-and-home purchase loan and no payments are due during home building. If you use an FHA one-time close home loan, your first mortgage payment will be due once your home's construction is complete.

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Source: homeguides.sfgate.com