FHA construction loan.

What is a FHA Construction Loan

A Michigan FHA construction loan is a mortgage program offered by the Federal Housing Administration that allows a borrower to build a new home. This is a one time close home loan that does not require a separate construction loan and end loan. This allows a borrower to qualify once and lock in a low mortgage rate without re-qualifying and paying for closing costs twice.

Michigan FHA Construction Loan: We now offer FHA Construction Loans down to a 620 Credit Score!

For more information on FHA Construction Loans call us at 800-555-2098 or apply online today!

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    What are the benefits of a FHA Construction Loan

    The FHA construction loan offers many benefits to borrower that wish to build their own home. Advantages include a small required down payment as low as 3.5%, no mortgage payments during the construction process, flexible credit guidelines and low mortgage rates. This program is a Stick Built Home Construction Loan or even a Manufactured Home Construction Loan.

    List of FHA construction loan benefits

    • 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
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    What are the Downsides to FHA Construction Loans?

    The FHA construction loan program has several advantages however there are some downsides as with all loan programs. The FHA insures mortgages for banks and lenders which allows for flexible credit guidelines however it does come as a cost. There is a 1.75% fee that is added to your loan amount at the closing called up front mortgage insurance. Additionally there is a monthly mortgage insurance premium similar to that on conventional mortgages which is paid to the FHA for insuring your mortgage.

    Loan Limits

    Another downside to the government insured construction mortgage is that the loan amount is limited based on the county and state of the property. The loan limits start as low as $271,050 and go as $721,050 in high cost areas like Hawaii. Any amount to build the home above this limit would need to be paid for in cash by the borrower.

    Downsides to the FHA construction loan include:

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