When building a new house instead of purchasing an existing property, you might mistakenly think that a conventional home loan is your only option. You should know that FHA has a loan for construction! There are a few key differences between conventional and FHA construction loans. The following is some information.
The appraisal for an FHA loan is usually more costly than for other mortgages. The reason is that they must be FHA authorized and the report is more complicated. With new construction, appraisers must analyze specifications to come up with a price. An inspection prior to closing is also typical to validate that the finished house is consistent with the plans.
Some mortgage companies process applications without charge. However, an application fee is needed for an FHA construction loan. The exact amount may vary depending on the kind of home you are constructing.
Minimum Required for Down Payment
The lowest you can put down for FHA loans is 3.5%, compared to 5% or 10% for conventional loans. Furthermore, some of the funds required may be a gift from a family member. Proof of the source of funds may be needed.
More paperwork is normally necessary with an FHA construction loan. There is more risk when it comes to home building. As with any loan, mortgage companies will also review your personal qualifications and credit profile too.
FHA Maximum Loan Amounts
Loan limits differ for every type of loan. For FHA, it depends on the specific county. It is useful to find out the limits in your area ahead of time. The figures may be different every year, so refer to your mortgage officer for correct limits.
More Information on FHA Loan
FHA Loans were created to make buying real estate possible for more low to middle class buyers. They have become a preferred option for many first time buyers. FHA construction loans have a litle more work than other mortgages but is an optimal option when constructing a new home. Call your loan officer for more detailed information on this program and to learn if it will work for you.