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.
We have done extensive research on FHA One-Time Close mortgages and spoke directly to the licensed lenders for most states. These 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.
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Please note that the FHA One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes).
1. Send your first and last name, e-mail address, and contact telephone number.
2. Tell us the city and state of the proposed property.
3. 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.
4. Are you or your spouse (Co-borrower) eligible veterans? If either of you are eligible veteran’s, the down payment is $0 up to the maximum VA lending limit for your county. If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.