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FHA Construction Loan
The FHA construction loan program grants a short-term loan that transitions into a long-term permanent loan after your home is built. The main advantage of this program is that the purchase and construction costs in a single mortgage loan. So instead of borrowing once in the form of a short-term loan to buy a site to carry out the needed construction, and then repaying that loan by borrowing again, you effectively borrow just once. And that means lower fees and other closing costs. However, a slightly higher rate is possible.
- The borrower must have contracted with a licensed builder to begin construction.
- The borrower may be the general contractor if the borrower is licensed as one.
- The borrower must be purchasing the land at the closing of the construction loan, or have owned the land for six months or less at the date of case number assignment.
- After funds at closing are disbursed to cover the purchase of the land, the amount of the mortgage must be put in an escrow account to be disbursed as the construction process moves forward.
FHA stands for federal housing administration, which a past of US Department of Housing and Urban Development. They don’t lend the loan themselves, but they guarantees the mortgage made to a qualified buyer. The rules for FHA construction loan eligibility apply to construction loans the same as to other non-construction FHA mortgages.
If you are ready to start the process of a FHA Construction Loan, apply now and an expert will help you with the entire process!