You want to buy a home, but you're not finding the style that quite fits your wants and needs. Well now you have options, and plenty of them!
Introducing the FHA Construction loan, the mortgage loan that let's you to make repairs or renovations. In this blog post, we will tell you how it works and requirements.
What is a FHA construction loan?
This loan comes in two different ways:
- A construction to permanent loan which allows the home buyer to build and own a home from scratch.
- A 203(k) rehabilitation mortgage allows the home buyer to purchase an existing home AND finance the necessary changes and renovations. This type of loan can be used by homeowners to refinance their mortgage to do some home improvement as well.
Basically, one is meant for building brand new homes and the other is for renovating a fixer upper.
Construction to Permanent Loan
The construction to permanent loan makes life easier by combining a construction loan and a long-term mortgage loan into one. Keeping up with two different loans for a home would get complicated so it gives a peace of mind.
This loan includes only a one-time mortgage closing rather than closing on a loan for building the home and a loan for the mortgage on the home. Saves time and the extra monthly payment.
FHA Construction to Permanent Loan Requirements
There's always a catch when something is so good. Before someone can submit an application for this loan type, the borrower must:
- Contract renovations and repairs with a licensed general contractor. If the borrower happens to be a licensed general contractor, there's a chance they can fill the required role.
- Purchased the land by the time the construction loan closed or have already owned it for no more than six months.
203(k) Rehabilitation Mortgage
The two types of the 203(k) mortgages are:
- Standard - This loan is usually used for bigger repair and remodeling work with the minimum cost sitting at $5,000. Since it's made for larger (more costly) projects, the borrow must speak with a 203(k) consultant to assess the total cost of improvements beforehand in order to get mortgage stamped for approval.
- Limited - This version of the loan is practically the opposite of the standard. Typically, this is used for smaller remodeling and repair work. The total costs of remodeling and home improvements cannot exceed $35,000. And you won't be needing a 203(k) consultant for this one.
For future reference you can find a 203(k) consultant on the HUD website. You'll be able to search for one located conveniently near you with the search function.
How to Apply? Speak with an Approved Lender Like Us
This type of loan can't be applied for just anywhere. The FHA construction loan needs to be done with a FHA approved lender.
This is what the mortgage lender will need from you:
- Your personal information, like age, income and social security number.
- A credit score of at least 580 for maximum financing. But keep in mind other things like home's appraised value and nationwide mortgage limits are taken into consideration.
- The location of the property and type.
Want to Learn More About The Different Types of Construction Loans?
It's best to get in touch with an approved lender like us to determine what best fits your needs and what sorts of documentation is needed to get approved for this loan type. Building your dream home is now possible with all the options available to you today. Let's get you into the house you've always wanted at the rate you never thought you could get.