October 19, 2020
Do you know what type of FHA home loan you need? There are many options with an FHA mortgage and not all of them involve purchasing a new home; you can apply for FHA rehab loans, FHA refinance loans, even an FHA reverse mortgage for qualified borrowers aged 62 or older.
FHA One-Time Close Construction Loans For Building A New Home
FHA loans do not require you to purchase property that has already been built; did you know there’s an FHA construction loan option that features only one loan application and closing date? Many participating lenders offer FHA One-Time Close construction loans; for those who financially qualify this allows you to have a house built for you from the ground up.
You may find some lenders willing (or unwilling) to offer FHA construction loans for manufactured or modular housing; some lenders only process FHA construction loans for “stick-built” homes crafted from the foundation up, rather than allowing loans for manufactured housing to be “assembled” on-site.
You’ll need to ask your lender if that financial institution offers FHA construction loans for non-stick built properties. Lender requirements, state law, and other standards will apply in addition to FHA home loan rules.
FHA Rehab Loans And FHA Rehab Refinance Loans
The FHA home loan program allows lenders to offer rehab loans for the purpose of renovating, repairing, upgrading, or improving a property. The improvements must be FHA/lender approved and certain things cannot be done with an FHA rehab loan such as installing luxury items. HUD 4000.1, the FHA loan handbook, has this to say about FHA rehab loans, which are known as FHA 203(k) Rehabilitation Morgages:
“The Section 203(k) Rehabilitation Mortgage Insurance is used to:
-rehabilitate an existing one- to four-unit Structure, which will be used primarily for residential purposes;
-rehabilitate such a Structure and refinance the outstanding indebtedness on the Structure and the Real Property on which the Structure is located; or
-purchase and rehabilitate the Structure and purchase the Real Property on which the Structure is located.”
There are also FHA rehab loans for disaster victims-talk to your loan officer or find a new participating lender to discuss this option if you are in a federally-decclared disaster area.
FHA Refinance Mortgage Loan Options
You have plenty of choices when it comes to refinancing either an existing FHA mortgage or a non-FHA home loan such as a conventional, VA mortgage, USDA, etc.
According to HUD 4000.1:
“A refinance transaction is used to pay off the existing debt or to withdraw equity from the Property with the proceeds of a new Mortgage for a Borrower with legal title to the subject Property…FHA insures several different types of refinance transactions:
1. Cash-out refinances are designed to pull equity out of the Property.
2. No cash-out refinances of FHA-insured and non FHA-insured Mortgages are designed to pay existing liens. These include: Rate and Term refinance, Simple Refinance, and Streamline Refinance.
3. Refinances for rehabilitation or repair (Section 203(k)).
Talk to your participating FHA lender to learn more about these FHA loans and how they could be right for you depending on your financial goals and needs.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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