The process for obtaining a new FHA construction loan is not complicated as long as you’re knowledgeable about Federal housing administration loan requirements.

Fha backed construction loans come with massive paperwork requirements, and this article would explain some of the essential guidelines.

You’ll have to navigate the minimum down payment requirement, mortgage insurance, plus Fha loan limits.

The following Fha lending limits information will enable you to find a capable loan officer, and complete the construction loan application to secure your Fha rehab loan.

FHA construction loan – Find an Approved Fha loan Lender

The first step in getting an Fha loan of any type, is to seek the services of an approved Fha mortgage lender.

The qualified mortgage lender must be approved by the department of housing and urban development (HUD) to originate Fha mortgage loans.

You can find some of the qualified lenders online, or you can ask your Realtor for list of approved lenders in your local area.

Fha rehab loan – construction loan down payment requirement

You need a minimum down payment of at least 10% of the purchase price to qualify for FHA construction loan financing.

You can get these funds from your savings or checking account, gifts from family or friends, or other down payment assistance programs.

Fha construction loans do need to see clear paper trail of how you obtained the funds. Your last three months bank statements or gift letter, or down payment assistance paperwork would suffice!

Attach copies with your completed construction loan application, before submitting it to your Fha approved loan officer.

Find out your Fha loan limits

While Fha construction loans are easy to obtain, you need to find out the Fha rehab loan limits for your area.

The Fha lending limits are based on certain criteria established by the department of housing and urban development, and vary depending on cost of living index, in your town and state.

You can visit the FHA/HUD loan limit website (see resource link below). On the HUD website, the mortgage loan calculator would be helpful in determining the Fha construction loan limit in the area where your real estate is located.

Construction loan application – Required documents

The loan application for an Fha construction loan, is a little more extensive than a regular Fha home loan. An experienced loan officer would guide you through the process, but you would need the following documents:

Several weeks of pay stubs or better yet, letter from your employer stating length of employment, your position, salary and value to the firm.

Several months banks statements. Be ready to explain any recent large deposits. Two or three years completed tax returns, with attached W-2s. Be aware that most lenders now verify your submitted tax documents directly with the IRS.

You also need to submit your contract of purchase, and also clearly stated contractors estimate, that includes the exact construction work that would occur once you get your Fha construction loan.

You would also need a copy of your drivers license or other government issued identification card. The construction loan application must be fully signed by all borrowers.

Some lenders would require upfront payment to cover your credit report, and other processing cost. Do not give out appraisal money until you at least get a conditional approval, which is usually based on the appraisal amount.

Fha appraisal fees range from $350 to $750, depending on the type of property you’re building, the state, and the appraiser’s fee.

Your lender is required to use an Fha approved appraiser. The appraiser would know what documents are required to substantiate your Fha construction loan.

This might be a good time to get your licensed contractor involved, and make sure you go over the construction estimates, before it is submitted to the relevant people necessary to get your Fha loan approved.

The full underwriting process will commence, once you’ve submitted all the required paperwork. If you satisfied all the Fha construction loan requirements, an okay to close order would be issued, and a closing date would be established.

A final inspection might be required by the appraiser, to confirm your home is ready for occupancy, before closing. At closing, you would be required to sign multitudes of documents and your identification would be verified.

The title company would get the funds from the Fha approved mortgage lender to be passed on to the seller, and then you would be given the relevant ownership documents and keys to your new real estate home.

The title company would guarantee free and clear ownership title, and you should be ready for your first mortgage payment in about 60 days!

While the Fha constructing loan comes with lower interest rate, the paperwork requirements can be quite daunting for the weak at heart.

This type of loan is also called Fha one time close mortgage. Most lenders are happy to grant this type of loan, since it’s guaranteed by the government agency.

Useful Resource Link:

FHA/HUD loan limit website