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How To Build A Dream Home With An FHA Construction Loan

Do you dream of building a home, but your credit score isn't high enough for a traditional construction loan? An FHA construction loan can help! 

Building your dream home with less-than-perfect credit is possible with an FHA Construction Loan.

There are two kinds of FHA construction loans that allow you to include the costs of constructing a new home: the construction-to-permanent mortgage and the FHA 203(k) mortgage. 

About Construction-to-Permanent Loan

This loan is considered "all-inclusive" as you can bundle the costs of buying land, the construction, and the lender fees into a single loan.

The FHA construction-to-permanent loan is unique in that it combines the aspects of a short-term construction loan with a long-term FHA loan. When construction is done, the construction loan will automatically convert to your permanent mortgage.

Steps for financing with an FHA construction-to-permanent loan:

Secure the land. You need to own the property upon which you will build your home or use the loan to buy the land.  

Get approved. These are the minimum qualifying requirements for an FHA loan:

  • A credit score of 580+

  • A debt-to-income ratio of 43% max

  • A 3.5% down for a HUD-approved project

  • A 10% down if not HUD-approved

  • A loan amount doesn't exceed FHA loan limits.

A Licensed Contractor

FHA construction loan requires a licensed contractor or builder. Be mindful that the contractor may be asked to provide documentation that confirms that they are licensed and insured.

Get a Home Appraisal

You'll be asked to get an appraisal that confirms the building materials meet FHA's minimum property standards.

Final Closing and Funding

If the appraised amount is enough to cover expenses, then you'll be ready to close. Otherwise, you'll need to come up with the difference or reduce your renovation costs.

Request Draws as the Work is Completed

The contractor will get paid as the work gets completed according to the schedule you set before closing.

Change to a Permanent Loan

When the home is complete, and you're ready to move in, the lender closes the construction loan and promptly converts the construction loan to a permanent mortgage.

About FHA 203(k) Rehabilitation Loan

An FHA 203(k) loan is perfect for remodeling your home or buying a home that needs serious upgrades. With this type of government home loan, you can roll the total cost into one loan amount.

However, unlike the above FHA construction loan, the FHA 203(k) program allows for minor repairs (projects must total at least $5,000) and major renovations to an existing home.

FHA 203(k) has two options: limited and standard.

Limited 203(k) loans. Use this loan to make improvements to a one- to four-unit property that costs up to $35,000 or less. Many use this loan to replace a leaky roof or install new flooring and subflooring. 

Standard 203(k) loans. The standard 203(k) program is perfect for more extensive renovations, such as:

  • Replacing the plumbing 

  • Making a home wheelchair accessible

  • Altering the structure

  • Adding or improving landscaping

Note that the standard 203(k) program requires a licensed supervisor to oversee the project. 

You have more options for financing a new construction or remodeling project. A standard construction home loan, VA home loan, and a USDA home loan are but a few of the mortgages available for building a dream home. Contact us today to get matched with the right home loan. 

 

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About Us

We've been helping customers afford the home of their dreams for many years and we love what we do.

Company NMLS: 1564450
www.nmlsconsumeraccess.org

State Licenses:
Delaware – 36882
Florida – MLD1437

Contact Us

701 Route 73 North, Suite 2
Marlton, New Jersey 08053
Phone: (856) 334-1200
info@nationone.com


 

Georgia – 59744
Maryland – 22486

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General

Nation One Mortgage Corporation strives to ensure that its services are accessible to people with disabilities. Nation One Mortgage Corporation has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.

Accessibility on Nation One Mortgage Corporation website

Nation One Mortgage Corporation makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows nationone.com to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).

Enabling the Accessibility Menu

The Nation One Mortgage Corporation accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.

Disclaimer

Nation One Mortgage Corporation continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.

Despite our efforts to make all pages and content on Nation One Mortgage Corporation website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.

Here For You

If you are experiencing difficulty with any content on Nation One Mortgage Corporation website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.

Contact Us

If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: info@nationone.com

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Nation One Mortgage Corporation Accessibility Statement

General

Nation One Mortgage Corporation strives to ensure that its services are accessible to people with disabilities. Nation One Mortgage Corporation has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.

Accessibility on Nation One Mortgage Corporation website

Nation One Mortgage Corporation makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows nationone.com to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).

Enabling the Accessibility Menu

Nation One Mortgage Corporation accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.

Disclaimer

Nation One Mortgage Corporation continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.

Despite our efforts to make all pages and content on Nation One Mortgage Corporation website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.

Here For You

If you are experiencing difficulty with any content on Nation One Mortgage Corporation website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.

Contact Us

If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: info@nationone.com