FHA New Construction To Permanent Fixed-Rate Mortgage

FHA New Construction To Permanent Fixed-Rate Mortgage

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this article, we will cover and discuss qualifying for FHA new construction to permanent fixed-rate mortgage loans. FHA New Construction Mortgages is now offered at Gustan Cho Associates. The new New Construction Loan Program at Gustan Cho Associates is a one-time-close loan program on new construction homes. We are one of the very few national mortgage companies that offer FHA Construction Loans with a one-time close. The housing market is booming nationwide. Many pre-approved home buyers are being priced out of the housing market due to inventory shortages. Housing prices are increasing nationwide.

Skyrocketing Home Prices Posing Problem For Buyers Getting Priced Out of the Housing Market

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The Federal Housing Finance Agency (FHFA) has increased conventional loan limits for three years in a row due to rising home prices. Conforming loan limits for 2022 are now at $647,200 unless the property is located in a high-cost area. High-balance conforming and FHA loans in high-cost areas are capped at $970,800. HUD, the parent of FHA, followed FHFA’s lead in increasing FHA Loans Limits. FHA Loans Limits for 2022 are now at $420,680 on single-family homes in traditional areas. High-cost areas have higher loan limits. There is no maximum loan limit cap on VA loans. Homebuyers can now qualify for New Construction To Permanent FHA Loans at Gustan Cho Associates.

New Construction One-Time Close FHA Mortgage Program

Gustan Cho Associates is one of the very few national lenders that offer New Construction to Permanent Mortgages with a one-time close on FHA loans. Most lenders normally require a two-step construction to permanent financing program on new construction loans. The two-step construction to permanent financing requires much more paperwork, red tape, and a second home appraisal after the construction has been completed.

Build Custom Home With FHA New Construction Loan

FHA construction loan mortgages are becoming increasingly popular during today’s surging housing market where many homebuyers are getting priced out of existing homes due to bidding wars. 

Our FHA New Construction One-Time Close allows financing for the lot, construction, and the final end loan after the house has been built. A One-Time FHA New Construction Close Mortgage Program costs substantially less than a two-step construction to a permanent close. Less paperwork and stress. There are no construction bridge loans to worry about so no additional fees and costs are required with a step one-close FHA Construction Loan. Borrowers with our one-time FHA Construction Close do not have to worry about getting a second final home appraisal.

FHA New Construction One-Time Close Mortgage Process

Gustan Cho Associates will finance the cost of the lot purchase, the cost of the construction, and the final permanent FHA loan with a one-time closing. The process is very streamlined and simple. Borrowers do not have to make any payments during the period of the construction process. Borrowers and the property do not need to be -requalified after completion of the project. The closing is done prior to the start of the construction process.

Eligibility Requirements And Guidelines

Borrowers need to meet all HUD Mortgage Guidelines:

  • The minimum down payment required is 3.5%
  • Maximum loan limit to FHA county mortgage limits
  • Only owner-occupant primary home buyers qualify
  • Two-to-four unit multi-family properties do not qualify
  • Condominiums and townhouses do not qualify
  • Automated and manual underwriting allowed
  • The minimum credit score of the borrower needs to be 620 FICO
  • Single-family homes only
  • Manufactured homes meeting HUD Property Guidelines qualify
  • Lots can be owned, gifted, or lenders will finance it

Qualifying For FHA New Construction One-Time Close Mortgages

Borrowers who need to qualify for FHA New Construction To Permanent Loan Program, please contact us at 800-900-8569 or text us for a faster response. Gustan Cho Associates is a national 5-star mortgage company with no lender overlays on government and conventional loans. The team at Gustan Cho Associates are also experts in non-QM loans and alternative financing programs. Many consider us a one-stop mortgage shop. Over 75% of our borrowers are folks who could not qualify at other lenders due to their overlays or because their loan officers did not qualify them properly. Gustan Cho Associates also offers VA and USDA New Construction One-Time Close Mortgage Loans. 

FHA New Construction To Permanent Fixed-Rate Mortgage Lending Requirements

Gustan Cho Associates offers several different types of FHA New Construction Mortgage. The most popular FHA New Construction Mortgage Loan Program we offer is the one-time close new construction FHA Loan. The FHA New Construction Mortgage Program is a phenomenal option for those who have family land or had land passed on to them as part of their inheritance.

How Does The FHA New Construction Mortgage Loan Program Work

Other homebuyers may have purchased they want to build on the lot sometime back. The way the FHA New Construction Mortgage Loan Program work is that the lender will advance a certain portion of the draw every time each phase of construction is completed. In this blog, we will discuss FHA New Construction Mortgage Program and how the process works. The main borrower is the home buyer. FHA New Construction Mortgage Guidelines require a 3.5% down payment on the completed value and purchase price of the home. The FHA New Construction Mortgage Loan Program is a one-time close. After the project is fully completed, the construction loan converts to a permanent FHA loan.

Open End And Permanent Loans

An open-end loan is also referred to as a permanent loan. A home buyer will make arrangements to build their home with a reputable home builder. The builder will provide their own financing when building the home. The home buyer will need to get fully pre-qualified and approved prior to the start of construction. When the home is finished, the home buyer will then close on their home loan with their lender. These are very common home loans.

FHA New Construction Mortgage Rate Lock

FHA New Construction Mortgage Rate Lock

Lenders can lock an FHA New Construction Mortgage now although the construction may take time. Rate Locks can get extended as time passes. If the construction of the home takes longer than six or more months, the rates will be secured due to rate lock extensions. Depending on the FHA Construction Mortgage Loan Program, interest payments on the construction loan may be levied by the loan during the construction phase of the mortgage process.

How Long Does New Construction Take From Purchase Contract to Completion

Normally a home builder will get their startup initial funding at the time of the first closing. Increments of work completed will be paid to the builder as the work progresses. If the lot has been pre-paid and/or the owner owns the lot, lenders will require that the lot ownership be seasoned in owning the lot for at least six months.

Mortgage Rates And Costs On FHA Construction Mortgage Loans

FHA Construction Loans are considered riskier than traditional FHA Loans. Any new construction loans have pricing adjustments and overlays by the individual lender. Lenders will require a higher mortgage rate on new construction loans. Borrowers are often charged the following fees and costs on new construction home loans:

  • Origination fees and discount points
  • Construction to Permanent Admin Costs
  • Processing and Underwriting Fees
  • Modification and Administrative Fees
  • Title Charges throughout the mortgage process and construction phase
  • Inspection fees
  • Appraisal and appraisal updating fees
  • Plat survey, permitting, and foundation costs and fees

Construction And Mortgage Process Until Completion

All new construction home buyers will close on their land and home prior to the start of the construction process. Prior to final funding, there will be a final home inspection to make sure that the home is built to HUD Guidelines, all permits have been taken out, and the home meets all HUD, city, county, state ordinances, and building guidelines. There are normally five times a lender/title company will send out an inspector to make sure that all trades have been paid and the materials have been paid in full. Each time, the title will be updated to make sure there are no liens against the property. Mortgage Rates are locked prior to the start of the construction so as long as rates are updated and extended, home buyers do not have to be alarmed that the rates will skyrocket.

Maximum Loan Limit on FHA New Construction Loans

All limits on the loan will be set by the lender. Homeowners cannot go beyond the FHA loan limit capped at $420,680 unless they are buying in a high-cost area. Credit requirements are higher on FHA construction loans than they are on traditional FHA loans. Most lenders do have overlays on FHA mortgages. Debt-to-income ratios are limited to a maximum of 45% by most lenders. Most lenders will require two months’ reserves of principal, interest, taxes, and insurance (P.I.T.I.). Reserves cannot be gifted. Needs to be the borrower’s own funds. Builders and general contractors need to be licensed, bonded, and experienced. Borrowers are not expected to restart the whole mortgage process all over again after the completion of the home. NON-Occupant co-borrowers are allowed.

Get Approved For FHA New Construction Mortgage Loans With a Mortgage Lender Licensed in 48 States

To qualify for FHA new construction mortgage with a mortgage company with no lender overlays on government and conventional loans, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, on evenings, weekends, and holidays.

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  1. Would like to see if I qualify for a 203K Rehab loan in Virginia. My credit is around the mid 600’s and I have been paying timely on all of my bills in the past 12 months.

  2. I have worked hard to improve my credit, no payments missed or late for over 2 years, but my credit score seems to be stuck between 500- 600. When one score hits 580-600 the others don’t and everyone seems to take all 3 and uses the middle one.

  3. my wife and i are looking for an fha construction loan for a 2 bed 1 bath house that we alredy have full and submit ready plans for that has a cost to build of $66,500 i am purchacing a 1/2 acre piece of land in rio rancho NM, and we have $6,000 for down payment/closing costs. i am self employed ( not long enough to have proof of income) with credit scores of: Experian- 582 /Equifax -590 /TransUnion-610. my wifes are roughly 580. but we also have a co borrower that has i believe a credit score of over 700. we have been paying rent on time since we got together (5+ years) at about $875 per mo. no evictions or bankruptcies mainly just lack of credit. please let me know if you can get us approved. thank you

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