Location matters when you are applying for an FHA One-Time Close construction loan. These mortgages are for borrowers who don’t want to purchase an existing property but want a home built for them from the ground up, but FHA One-Time Close construction loans, (FHA OTC) do have some restrictions on where a home can be constructed.
These restrictions aren’t as difficult to understand as you might think; FHA loan officers are required to insure the home as an economic and functional life that will last the duration of the mortgage. Part of that due diligence is making sure the home is capable of withstanding environmental conditions and/or not being put directly in harm’s way due to know problems.
That’s one reason why the FHA loan rules for home loans includes a requirement to insure the new home is not in certain natural disaster zones. For example, from HUD 4000.1:
“The Mortgagee must determine if a Property is located in a Special Flood Hazard Area (SFHA) as designated by the Federal Emergency Management Agency (FEMA). The Mortgagee must obtain flood zone determination services, independent of any assessment made by the Appraiser to cover the Life of the Loan Flood Certification.”
There are specific guidelines for new construction or proposed construction loans, too:
“If any portion of the dwelling, related Structures or equipment essential to the value of the Property and subject to flood damage is located within an SFHA, the Property is not eligible for FHA mortgage insurance unless the Mortgagee:
- obtains from FEMA a final Letter of Map Amendment (LOMA) or final Letter of Map Revision (LOMR) that removes the Property from the SFHA;
- or obtains a FEMA National Flood Insurance Program Elevation Certificate (FEMA Form 81-31) prepared by a licensed engineer or surveyor. The elevation certificate must document that the lowest floor including the basement of the residential building, and all related improvements/equipment essential to the value of the Property, is built at or above the 100-year flood elevation in compliance with the NFIP criteria, and insurance under the NFIP is obtained.
Depending on circumstances, housing market, and other factors, there may be lender requirements above and beyond this guidance. Borrowers may be affected by similar rules for known forest fire zones, mudslides, or other issues. Lender requirements and state law in these areas will apply in addition to FHA loan requirements.
We have done extensive research on FHA, VA and USDA 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.
Your response to firstname.lastname@example.org authorizes us to share your personal information with a licensed mortgage lender in your area to contact you.Please note that the One-Time Close Construction Program only allows for single family dwellings (1 unit) – and NOT for multifamily units (no duplexes, triplexes or fourplexes).
- Send your first and last name, e-mail address, and contact telephone 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 you know it). 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 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.