What is a FHA Construction Loan
Program Temporarily Discontinued
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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Benefits of a FHA Construction Loan
The FHA construction loan offers many benefits to borrowers 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.
- 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 Mortgage 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
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 at a cost. There is a 1.75% fee that is added to your loan amount at the closing called upfront 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 of the property. In Michigan, FHA loan limits for single-family homes are up to $541,287 in 2026. Any amount to build the home above the applicable county limit would need to be paid for in cash by the borrower. See our Michigan FHA loan limits for current details.
Downsides to the FHA construction loan include:
- Must have a 620+ Credit Score
- Borrower cannot perform construction
- Maximum loan amount set by FHA county limits
- No Adjustable Rate mortgages available
Ready to build in Michigan?
Talk to a licensed Michigan loan officer about FHA one-time-close construction financing.
Apply Now 800-555-2098