December 2, 2021

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FHA Loan Down Payments: Some Simple Rules

Construction Loan Advice For New Borrowers

What do you need to know about FHA loan down payment requirements? First, in most cases, a down payment is required, and your down payment requirements are dictated in part by your credit scores. But you also need to know that your down payment could be waived if you are applying for a construction loan and have land equity to use instead.

There are FHA loan rules you should know while you are still in the planning stages of an FHA purchase loan. These will help you decide what to do about saving up for a down payment and dealing with certain closing costs.

Basic Down Payment Rules

As stated above, FHA loan rules usually require a minimum 3.5% down payment for all single-family mortgage loan transactions.

But don’t overlook one exception you should know about if you’re building instead of buying existing construction.

If you want to build a home from the ground up using an FHA One-Time Close construction mortgage, consider this: some borrowers do not have to make a down payment if they use land equity in place of the cash down payment.

If you own the land you are building the home on and have equity built up in it, ask your loan officer about using land equity as your down payment.

FHA Up-Front Mortgage Insurance Premiums

The FHA Up-Front Mortgage Insurance Premium (UFMIP) must either be paid in full at closing time or it can be rolled into the loan amount instead.

Those who saved for a down payment on a home they are building with a One Time Close construction loan sometimes consider paying the UFMIP in cash using the money they were saving for the down payment–this is a great move for borrowers who can afford the out-of-pocket cost.

Those who don’t have the option to use land equity as a down payment may consider adding the UFMIP to the loan amount to cut their out-of-pocket expenses on the mortgage.

Credit Scores

For FHA home loans including One-Time Close construction loans, the minimum 3.5% down is required for borrowers with FICO scores 580 or better. This is the lowest down payment possible on an FHA mortgage.

FHA loan rules add that loan approval for those with FICO scores between 500 and 579 is still technically possible, but a higher down payment of 10% is required.

Your actual down payment requirement will depend on lender credit score standards. Shop around for a lender–you may find one with more forgiving standards closer to the FHA minimums.

Are you interested in a One-Time Close construction loan? Your lender’s FICO score requirements for down payments and loan approval will be stricter than usual. Not that the standards are impossibly higher–far from it.

But construction loans represent an elevated risk for the lender, who has more invested in a construction loan. The lender modifies the requirements to suit that investment. Ask your lender what the credit score requirements are for construction loans and compare with the other lenders you’ve reviewed. Shopping around for the best rates and terms is recommended.

Want More Information About One-Time Close Loans?

One-Time Close Loans are available for FHA, VA and USDA Mortgages.  These loans also go by the following names: 1 X Close, Single-Close Loan or OTC Loan.

We have done extensive research on the FHA (Federal Housing Administration), the VA (Department of Veterans Affairs) and the USDA (United States Department of Agriculture) One-Time Close Construction loan programs.

We have spoken directly to licensed lenders that originate these residential loan types in most states and each company has supplied us the guidelines for their products.

We can connect you with mortgage loan officers who work for lenders that know the product well and have consistently provided quality service. If you are interested in being contacted by a licensed lender in your area, please send responses to the questions below. All information is treated confidentially. provides information and connects consumers to qualified One-Time Close lenders in an effort to raise awareness about this loan product and to help consumers receive higher quality service.

We are not paid for endorsing or recommending the lenders or loan originators and do not otherwise benefit from doing so. Consumers should shop for mortgage services and compare their options before agreeing to proceed.

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 multi-family units (no duplexes, triplexes or fourplexes). In addition, the following homes/building styles are not allowed under these programs:  Kit Homes, Barndominiums, Log Cabin Homes, Shipping Container Homes, Stilt Homes, Solar (only) or Wind Powered (only) Homes.

Your email to authorizes to share your personal information with a mortgage lender licensed in your area to contact you.

  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 and/or the Co-borrower’s credit profile: Excellent – (680+), Good – (640-679), Fair – (620-639) or Poor- (Below 620). 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 veterans, down payments as low as $0 may be available up to the maximum amount your debt-to-income ratio VA will allow – there are no maximum loan amounts as per VA guidelines. Most lenders will go up to $750,000 and review higher loan amounts on a case by case basis.  If not, the FHA down payment is 3.5% up to the maximum FHA lending limit for your county.
Bruce Reichstein - FHA News Author

By Bruce Reichstein

March 24, 2021

Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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