In addition to new purchase home loans and refinance loans, a borrower’s options for a mortgage also include loans that allow money for home improvements, renovations, and even construction.
Know your FHA loan options before you choose a type of property or the kind of loan you seek. There are many ways to get additional funds to fix, rehab, or even build a home from the ground up.
FHA New Purchase Home Loans
There is an option with most FHA mortgages including new purchase loans that allows added funds for the purpose of buying and installing energy-efficient upgrades to the home. No matter what type of FHA mortgage you want, ask the lender about the FHA Energy Efficient Mortgage option which allows up to $6,000 or more depending on the project, credit qualifications, and other factors.
FHA Energy Efficient mortgages can also be used in nearly any of the loans mentioned below, but lender requirements and other factors may affect these transactions.
FHA One Time Close Construction Loans / Single Close Construction Loans
The FHA One Time Close construction loan / Single Close construction loan, also known as a construction-to-permanent loan, allows borrowers to have a home built for them from the ground up. Construction loans may require, depending on the lender, higher FICO scores than other types of loans, but many borrowers find the freedom to choose designs and layouts to be a very important part of the home buying process and prefer to have a house built.
Construction loans require the use of escrow, and depending on the length of the construction phase the borrower may need to discuss how the loan will properly amortize since mortgage payments won’t begin coming due until after the construction phase is complete.
Such arrangements may very lender to lender, but the most important thing for the borrower to know is that regardless of when the loan starts being paid, it must be paid off within the loan term.
If there is a one year delay from closing to occupancy and the mortgage payments begin after that year is over, there will either need to be an adjustment in the monthly amount due, or a discussion with the lender about alternative means to pay off the loan within the original term.
Construction loans come in both standard “two close” versions requiring two applications and closing dates-one for the construction loan and the other for the mortgage loan itself. Ask your borrower about the One Time Close construction loan option, it may be a big advantage over the “two close” construction loan option.
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, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar or Wind Powered Homes.
Your response to email@example.com 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.
FHA Rehab Loans
FHA rehab loans are designed especially for borrowers who want to to rehab, repair, or renovation work on an existing property. These rehab loans come in two basic types-a standard loan for large projects and a limited rehab loan for smaller rehab applications. Rehab loans are also available for those trying to repair or replace a home in a federally declared disaster area.
FHA Cash-Out Refinance Loans
The money from FHA cash-out refinancing can be used for any purpose acceptable to the lender including home improvements. If you are interested in cashing in on the value of your home to free up money to make home improvements, ask your loan officer about cash-out refinancing as an alternative to other types of loans-especially if you have a project that isn’t big enough to apply for a standard FHA rehab loan.