If you have chosen to build a new home over buying a pre-built house, you may mistakenly assume that a conventional loan is the only alternative. The good news is, FHA provides construction loans! There are a few notable differences between conventional and FHA construction loans. Below is an overview.
More paperwork is normally requested with an FHA construction loan. There is more unknown with home building. As with all loans, mortgage companies will meticulously look through your personal qualifications and credit worthiness as well.
Appraisals for FHA FHAs are often more than for other types of loans. The reason is that they need to be FHA certified and the report is more complicated. With a property not yet completed, appraisers must analyze paperwork on the amenities and other details to come up with a dollar amount. An inspection prior to closing is also typical to verify that the house completed is the same as the specifications.
Many lenders take applications without charge. However, an application fee is needed for an FHA construction loan. The charge may differ based on the style of property you are planning to construct.
Money Required for Down Payment
The lowest you can put down for FHA loans is 3.5%, compared to 5%-10% for other loans. Also, down payment and closing funds can be a gift from a relative. Documentation such as a gift letter can be requested.
FHA Maximum Loan Amounts
Loan amounts permitted for FHA loans are not the same as other mortgages. They will depend on the particular county. It is useful to find out the limits in your location in advance. The amounts can change every year, so ask a mortgage consultant for up-to-date amounts.
More About FHA Loan
FHA Loans were created to make purchasing homes more affordable. They are often a preferred program for all first time home buyers. FHA construction loans require a few more steps than typical conventional loans but is an optimal option for new homes. Call a loan consultant for more in-depth information on this program and to learn whether it is a good fit.