The requirements for new construction versus existing construction may differ due to a variety of reasons including the fact that the borrower can’t always take possession of a new or under construction home right away once the loan has closed. FHA loan rules for existing construction include appraisal requirements that may differ (procedurally) from new construction loans.
For these reasons, the FHA has specifically defined what constitutes a new, proposed, or under construction property versus one that is “existing construction”.
Existing construction is more or less a home that has already had an owner and has been in existence for a year or more. “Under construction” seems fairly obvious, but “new construction” properties are not so obvious.
Here is the FHA definition of “new construction” homes as found in HUD 4000.1:
“New Construction refers to Properties that are Proposed, Under Construction, or werecompleted within one year as defined below:
–Proposed Construction refers to a Property where no concrete or permanent material has been placed. Digging of footing and placement of rebar is not considered permanent.
–Under Construction refers to the period from the first placement of permanent material to 100 percent completion with no Certificate of Occupancy (CO) or equivalent.
–Existing for Less than One Year refers to a Property that is 100 percent complete and has been completed less than one year from the date of the issuance of the CO or equivalent. The Property must have never been occupied.”
As you can see, these are fairly specific definitions and the FHA loan rules (including appraisal requirements) appropriate for new construction would apply to the properties as described above.
New construction or proposed construction loans may not always be available from all lenders. It pays to shop around for the right type of FHA loan for your needs–talk to a loan officer to learn what options you might have for a new construction or under construction type FHA mortgage loan.
Learn More About FHA, VA and USDA One-Time Construction Close to Permanent / Single-Close Construction Loans
One-Time Close Loans are available with VA, FHA and USDA Mortgages. We have relationships with several large Mortgage Banking firms who specialize in these loans which also go by the following names: 1 X Close, Single-Close Loan or OTC Loan.
Our extensive research on these programs and their guidelines allow us to educate potential home buyers who want to explore purchasing a newly constructed home versus purchasing a resale home while utilizing the same down payments for each product type.
We are constantly updated on these programs and have extensive knowledge on VA (Department of Veterans Affairs), FHA (Federal Housing Administration) and USDA (United States Department of Agriculture) One-Time Close Construction programs.
We speak directly to the licensed lenders that originate these residential loan types in most states. They are qualified mortgage loan officers who work for lenders that know the product well. Each company has supplied us the guidelines for their product.
If you are interested in being contacted by one licensed lender in your area, please respond to the below questions to save time. All information is treated confidentially.
Please note that investor guidelines for the FHA, VA and USDA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes). Home types include: Site-Built, Modular or Manufactured Homes.
In addition, the following are “NOT” allowed under these programs:
Kit Homes – Steel Framing Kits, Barndominimums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar or Wind Powered Homes.
Your response to firstname.lastname@example.org authorizes us to share your personal information with a licensed mortgage lender that is familiar with your area to contact you.
- Send your first and last name, e-mail address, and good contact number.
- Tell us the city and state of the proposed property.
- Tell us your credit score and/or the Co-borrower’s credit score, if known. 620 is the minimum qualifying credit score for this product.
- Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veterans, the down payment is $0 up to the maximum amount that the debt ratio will allow – there are no maximum loan amounts as per the Department of VA. Most lenders will go up to $750,000. If not, the FHA down payment is 3.5% up to the maximum FHA Lending Limits for your county and the USDA down payment is $0 and based on maximum income.