Construction Loans - FHA & VA

FHA

Overview

  • Purchase of an Owner-Occupied Single Family Residence Site Built, Modular or Manufactured new construction property.

  • Land can be presently owned, free and clear or with a mortgage, or can be purchased simultaneously from the builder or separate land seller.

  • Land can be gifted within accordance of FHA Guidelines.

  • Builder will act as the General Contractor and will be responsible for the completion of home (borrower may not be involved in any of the construction work).

  • No payments due from the borrower during construction phase.

  • Manufactured homes qualify.

    • New homes only.

    • HUD Certification label required.

    • No single wide homes allowed.

    • Structural engineer report is required.

    • Must be titled as real property.

Requirements

  • Owner occupied.

  • 3.5% down payment. Land equity currently owned or gifted can be used as full or partial down payment.

  • 620 minimum credit; debt ratios cannot exceed 50% without compensating factors.

VA

Overview

  • 100% Loan, no down payment.

  • For Eligible Veteran, Service Member, and Surviving Spouse.

  • Transactions in which a Veteran has signed a contract to build will be considered a purchase, regardless of the category shown on the Loan Estimate/Closing Disclosure. Transactions without a Seller (e.g. Land currently owned by Borrower) will reflect a Purpose other than Purchase on the Loan Estimate and Closing Disclosure.

  • Allows for simultaneous purchase of the land or for the construction of a residence on land already owned by the veteran.

  • Builder must have a valid builder identification number prior to a VA notice of value being issued.

  • Self Help/Sweat Equity is Not Permitted. The borrower cannot perform any of the work.

  • Veteran is not required to make payments during construction phase. Builder is responsible for all interest payments during construction as well as any fees encountered during the construction period.

Requirements

  • Owner occupied only.

  • Debt to Income Ratios

    • Credit 620 to 659, maximum 45% debt ratio.

    • Credit 660+, AUS

  • Maximum Loan Limits

    • Conforming to $424,100.

    • Jumbo/High Balance to $750,000.

    • Maximum loan limits include financed VA funding fee.

  • Manufactured homes qualify.

    • New homes only.

    • HUD Certification label required.

    • No single wide homes allowed.

    • Structural engineer report is required.

    • Must be titled as real property.

  • VA Funding Fee

    • For the purpose of reducing the funding fee, ownership of the land by the borrower(s) prior to construction is eligible to count as a downpayment for purposes of reducing the funding fee, provided that the appraisal assigns a value to the unimproved land, and the value will count only to the extent that the loan amount is less than the NOV value. Lots held as contracts for deed are not considered owned by the borrower.

  • Appraisal

    • Ordered through VA.

    • Appraisal can be based on “Plans and Specs”, as long as the appraisal is completed before completion of the foundation.

    • When the property is 100 percent complete, the lender will contact the original VA appraiser to complete the VA final inspection.