When it comes to buying a home, you have two basic options. On the one hand, you can buy a home that’s already been constructed. On the other hand, you may decide that you’d prefer to build your home from the ground up. Many people prefer the latter option because it gives them a higher degree of creative control over their home’s design.
If you’re considering building a home, then you should understand FHA loans. Yes, FHA loans are commonly leveraged by those who are looking to buy an existing home. However, there are also FHA loans out there that can assist you if you’re interested in building a home.
This article has everything that you need to know about how FHA loans can help you to build a home!
Introduction to FHA Loans and FHA Construction Loans
A traditional FHA loan is a mortgage loan that’s backed by the Federal Housing Administration (FHA) to a homebuyer. In contrast to many loan options, FHA loans are great options for anyone with a less-than-stellar credit background. FHA loans are also notable for the fact that they typically come with low down payment options.
FHA construction loans are also intended for homebuyers with subpar credit and tighter-than-average budgets. But here’s the crucial detail that sets FHA construction loans apart from their traditional counterparts: FHA construction loans are specifically designed for homebuyers who want to build or drastically renovate a property.
Types of FHA Construction Loans
Are you interested in building or renovating a property? If so, then there are two basic types of FHA construction loans that you should be aware of:
- Construction-to-permanent loan. This loan option is specifically intended for homebuyers who are seeking to build their home from the ground up. In order to qualify for this loan, you’ll need to partner with a licensed general contractor to build the home. You’ll also need to pay the FHA minimum down payment of 3.5%.
- 203(k) rehabilitation loan. This loan option provides homebuyers with up to $35,000 to cover the rehabilitation costs of an existing property. Eligibility requirements for this loan include investing in mortgage insurance coverage and a minimum credit score of 500.
Learn More About FHA Loans for Building a Home
At Mortgage Solutions Financial, we’re passionate about helping aspiring homebuyers to find and buy their dream homes. To learn more about FHA construction loans – or to submit your loan application – please contact our office today!