Construction crew building a home using the Michigan FHA construction loan program.What is the FHA One time close construction loan program?


Conventional construction loans are typically difficult to qualify for and require very large down payments however the FHA has introduced a construction loan program for the average family. Qualifying is easy with flexible credit guidelines and low score requirements. The best part is that a family can build a home with as little as a 3.5% down payment.

Michigan FHA construction loans are one time close mortgage loans that do not require separate construction loans and end loans like a normal conventional construction loan. With a single mortgage a borrower can purchase the land, build the home and not have to worry about an end appraisal or refinance once the house is built. This Construction to Permanent loan program allows a borrower to avoid re-qualifying, reappraising and incurring additional loan closing costs.

Build your dream home with a low down payment with a FHA construction loan!

Benefits of the FHA Construction Loan

compare fha construction loan benefits

There are many benefits to FHA construction loans over other construction mortgage products. One major benefit is that a borrower does not have to pay mortgage payments during the construction. The first mortgage payment is typically 60 days after the certificate of occupancy is issued and the borrower can move into the home.

  • Borrower can use land equity as down payment
  • No payments during construction
  • One time close means half the closing costs
  • Low down payments required of only 3.5%
  • Programs available for low credit scores of 620+
  • Manufactured Homes and Modular homes are Eligible
  • Low Fixed Mortgages Rates
  • Locked in mortgage rate which reduces rate risk
  • Builder/retailer is allowed staged funding draws during construction
  • Closing costs and Fees may be paid by the Builder

Downsides to FHA Construction loans

While the FHA construction loan program is an amazing home loan option it does of course have some downsides. The largest downside is that the borrower will be required to pay up front mortgage insurance which is currently 1.75% of the loan amount. This gets added to the mortgage balance at the loan closing and is paid to the Federal Housing Administration to insure the mortgage. Additionally all FHA loans have monthly mortgage insurance which is similar to conventional loan PMI.

Loan Restrictions Include:

  • Must have a 620+ Credit Score
  • Borrower cannot perform construction
  • Maximum loan amount set by FHA loan limits
  • No Adjustable Rate mortgages available

Summary of the Construction to Permanent FHA Construction Home Loan

The FHA construction loan program opens up the door to home ownership for families in all walks of life. Building your own home may allow you to have the home of your dreams without settling for an existing home. Using the equity in your land or as little as a 3.5% down payment you may be able to build your next home. Our construction program allows for stick built home, modular homes and even manufactured homes.

For more information on a FHA Construction Loan call Riverbank Finance LLC at 1-800-555-2098 or send an inquiry below.

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